'All service providers to be brought into tax net under VAT regime'

The Chairman of Federal Board of Revenue (FBR), Sohail Ahmad, has said that all service providers, like professionals who can afforded to pay taxes, would be brought into the tax net under the new Value Added Tax (VAT) regime.
He told reporters here on Friday that the provinces were inching towards evolving consensus for allowing the FBR to collect VAT on services on behalf of provinces and returned them back after deducting 5 percent collection charges. In this connection, consensus would be developed between the federation and the provinces.
The existing general sales tax (GST) had lost its buoyancy as with passage of time all kinds of exemptions were allowed under sales tax regime. It is difficult to simultaneously abolish all sales tax exemptions under the Sixth Schedule of the Sales Tax Act. "Under the VAT strategy there will be no exemptions available except a few sectors such as food and medicine," he added.
He said that the services sector contributes 50 percent into the GDP of the country but its contribution is not taped for tax collection. The country can add up revenues by Rs 300 billion to 400 billion by expanding the tax net on all services, he added.
Flanked by Member Direct Tax Policy, Asrar Raouf who was recently appointed as spokesman of the FBR, the Chairman FBR said that the IMF was projecting tax gap in the range of Rs 700 billion and by expanding the tax base to all sectors as well as abolishing the exemptions, this gap could be bridged. To another query, he said that around Rs 300 billion to 400 billion were stuck up due to litigation at the judicial fora.
To another query about revenue collection target for 2009-10, he said that the FBR has so far collected Rs 260.5 billion for first quarter (July-Sep) period of the current fiscal despite decline in imports by 25 percent in this period.
They knew from day first the economy would remain slow in the first two quarters but it will start witnessing improvements from the second quarter (October-December) period and the FBR would achieve its desired target of Rs 1,380 billion by end June 2010, Sohail added. When asked about the role of chartered accountants in assisting taxpayers, Member Direct Tax Policy, Asrar Raouf clarified that such firms can only advise for avoidance of tax, but not evasion of taxes.