To improve tax management system: moot for abolishing collection of advance taxes, withholding of tax refunds

Chairman Tax Reform Commission (TRC) Masood Naqvi said that the revenue collection of the Federal Board of Revenue (FBR) could be doubled by ensuring effective enforcement and compliance of tax laws. Addressing National Tax Summit organised by SDPI and OXFAM here on Tuesday, Chairman TRC also proposed that to improve tax management system, Pakistan should take bold measures and abolish collection of advance taxes as well as withholding of tax refunds at least for one year.
The refunds should not be blocked for showing high revenue figures for achieving the tax collection target. This may result in fiscal deficit but would give us a realistic assessment of our revenue collection capacity. Pakistan should take donor on board and adopt major structural and policy reforms for improving tax collection, which has regressed over the last few years. A leading multinational said that Rs 5 billion refunds were stuck up with FBR. There was no need to accumulate liabilities for the sake of showing inflated figures, Naqvi observed.
He said that it is a pity that the Property Development Authority of Dubai had provided Pakistan the list of Pakistani investors, but the government has not raised any tax demand on them. Whereas, in India a stringent law has been passed and action have been taken.
He explained that due to complications in establishing multiple sales tax rates the government is looking forward to give a single rate this year, on which consultation with the stakeholders is going on. He said that tax on property was the most neglected area, which should be handled properly. Giving example of India's move in their recent budget, Massod Naqvi said that India introduced tax laws to confiscate assets equivalent to the property purchased abroad if the money was not transferred outside India through legal channels.
He also said that the benami property in case of non-declaration would be confiscated in India. "Pakistanis have invested in properties in UAE and Dubai and what measures we have taken in this regard?," he questioned. Former Finance Minister Dr Hafiz A Pasha said on the occasion that Pakistan was unfortunately nearing towards tax revolt mainly because elites captured the state.
There has been decline by 38 percent in last two years for creating demand by the FBR through audit exercise mainly because the tax base was shrinking massively, he said and added that the economy had stopped growing that's why sales tax on both imports and domestic front was showing negative growth.
Dr Pasha said that he had introduced Agriculture Income Tax (AIT) in 1997 but the penalty rate was never increased from Rs 100 to Rs 250 per acre in last 18 years. The penalty on non-filers of return in case of AIT was being charged at Rs 1000 only. He called for ending the SROs culture. He said that there was no room for reform in this elite culture. He deplored that the FBR took additional revenue measures on income tax side to the tune of Rs 144 billion in the budget but the growth of tax collection stood at just 6 percent in the ongoing fiscal year.
"We need big moves where tariff of customs should be brought down drastically and the rate of GST should also be reduced," he said. He added that without fundamental reforms nothing would change. Pasha told the summit that FBR raised at least 38 percent less than actual demand, in the last two years. He said growth in domestic sales tax had gone negative in recent months.
Earlier, Executive Director of SDPI Dr Abid Qaiyum Suleri, in his introductory speech put forth the question: Can we lead to progressive taxation or the regressive trend will continue? He said another important aim was to define a balance between direct and indirect taxes. He also spurred discussion on the role of provinces in sharing tax burden.
Deputy Executive Director of SDPI, Dr Vaqar Ahmed in his presentation highlighted that provinces raise only 6.5 percent of the total tax revenue. He said that tax administration machinery had fragmented structure that promotes friction between provincial and federal tax collectors. He proposed that base line of untapped revenue in agriculture, services and property should be established to improve the situation.
Senior Economist Dr Akmal Hussain proposed a universal social security cover for the population. He said countries across the globe adopted such scheme, when their economic situation was much worse than that of Pakistan. Former Chairman FBR, Abdullah Yousuf, Former President, Islamabad Chamber of Commerce and Industry, Shaban Khalid, Arif Jabbar Khan, Mustafa Talpur of Oxfam also addressed the summit.