ISLAMABAD: The Federal Board of Revenue (FBR) will document economic activities through data exchange/ linkages, to strengthen legislation on the taxation of international transactions and develop integrated taxpayer profiles under the new reform plan.
According to the draft of the Inland Revenue Service Strategic Reform Plan (2021-2025) expected to be launched here on Wednesday, to protect revenue in cases involving transfer pricing, base erosion and profit shifting through transactions across borders, the legislative regime will be strengthened by bringing legislation in accordance with international best standards.
Building of institutional capacity of the tax machinery is one of the important components of the reform plan. This reform goal will build the capacity of the FBR to meet good international practice in tax administration through two strategic objectives including improving capacity and skills of staff and strengthen integrity, it highlighted.
The FBR needs to build the capacity and capability of staff to meet the demands of modern tax administration, and the expectations of citizens. Integrity is integral to ensuring voluntary compliance by taxpayers, the plan said.
An integrated taxpayer profile will be developed based on all available data from the FBR and close existing gaps on terms of a ‘whole-of-taxpayer’ view. This will assist the FBR to identify non-reporting and under-reporting of taxable activity, and to prioritize the data collection and integration processes.
IRS Strategic Reform Plan 2021-24 chalked out
This reform area will integrate the FBR’s internal databases and improved linkages with third parties required to provide information to the FBR, such as withholding agents. It will create accessible databases where economic activities exist by creating data-generating processes, rendering information on taxable income and transactions.
The FBR will strength MIS system of IRIS and other IRS software development of a data management and analytics system that can generate real-time statistics for operations, exceptions, warnings, and errors for all operational systems. In addition to customized information about returns, assets and withholding declarations, registration, arrears and payments, the system will provide a comprehensive 360-degree view of a taxpayer.
It will develop robust linkages with data-generating processes and third-party databases. Important data generating processes of the economy will be identified, and technological bridges created with public and private entities carrying out and managing transactions with IT systems capable of transmitting data to IRS systems. Initially the focus will be on property transactions by non-governmental agencies, banks, the National Database and Registration Authority (NADRA), utility companies, the Securities and Exchange Commission of Pakistan (SECP) will be prioritized.
The exchange of data will be real-time, or automatic periodic or electronic periodic. Software capacity will be developed to facilitate the automatic exchange of information, data warehousing and analysis.
The FBR will integrate data systems with tax authorities across the nation, it said.
In this regard, the data from other revenue authorities across the country, including Customs, Provincial Boards of Revenue, Excise and Taxation Departments and Provincial Revenue Authorities will be integrated with the IRS data and systems. The IRS will access data from various databases to conduct data-led assessments. The data will be used to define risk parameters for risk profiling. Backward linkages to customs risk management for goods clearance will also be provided. There will be collaboration with public and private sector data managers for standard and up-to-date data. The
data can only be used to detect tax evasion with minimum human contact if it is in standard format and is up-to-date, reflecting economic activity as soon as possible. When data is accessible without much time lag, it makes verification simpler and possible. Updated databases will significantly improve the effectiveness of using third-party data, reduce the cost of administration and facilitate taxpayers, FBR added.
Copyright Business Recorder, 2022
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