Harmonization of taxes

During the recently concluded National Tax Conference titled "Taxation: a pathway to prosperity" organised by the Institute of Chartered Accounts it was revealed that the Federal Board of Revenue (FBR) and all the four provincial tax authorities have developed a consensus to harmonize taxes with the objective of facilitating taxpayers, including through early resolution of sales tax collections on the third category of disputed services/goods.
Explaining the background, Advisor to Sindh Revenue Board (SRB) pointed out that previously FBR was collecting sales tax on services on behalf of the provinces for a 2 percent fee, however, the need for harmonization arose subsequent to the establishment of SRB to collect sales tax on services, allowed by the 1973 constitution to the provinces but remaining dormant till the 7th National Finance Commission award 2010. SRB was followed by the establishment of Punjab Revenue Authority (PRB), Khyber Pakhtunkhwa Revenue Authority (KPRA) and Balochistan Revenue Authority (BRA).
The need to harmonize taxes and set up a single sales tax return mechanism to facilitate taxpayers was felt as early as in 2010. A service provider headquartered in one province but providing a service in all four provinces was liable to file sales tax returns with all the provincial collection authorities as well as with the FBR. Thus harmonization and a single tax return would facilitate the service providers considerably as at present as many as six laws may govern the filing of sales tax on services - four provinces, Islamabad Capital Territory and FBR. Additionally, Excise and Taxation (E&T) departments, for example, began to work as a separate entity under the provincial governments; however they maintain no formal administration connection with SRB, PRA, KPRA and BRA. It is therefore validly argued that until and unless all federal and provincial tax agencies are unified and harmonized, the dream of optimum tax collection cannot materialize.
Lack of harmonization and general confusion on the jurisdiction between FBR and provincial tax agencies has prevailed since 2010 with frequent meetings between all the players (federal and provincial tax collecting agencies) to resolve the issues remaining inconclusive.
To conclude, the failure to reach an agreement was one of the reasons, according to tax experts, for sustained failure of subsequent federal administrations to raise total tax collections. Given our poor tax-to-GDP ratio relative to not only regional countries but also within our own historical context it is imperative that harmonization be achieved as quickly as possible.