Federal Board of Revenue (FBR) Chairman Sohail Ahmed has said that the new occupational group, ie Inland Revenue Services (IRS), has been created in line with the Establishment Division rules of business to integrate domestic taxes for raising tax-to-GDP ratio. He told media here on Tuesday that the IRS had not been created on the dictation of the International Monetary Fund (IMF).
"There was no pressure from anywhere for creation of the IRS, which has been done to domestically integrate income tax, sales tax and Federal excise," he said. Under the office memorandum of the Establishment Division, the IRS had been created for re-organisation of the FBR. This document had not been declared illegal by anyone, he added.
The FBR Chairman said over 900 officials had given option for the IRS, and added that most of the officials belonged to Income Tax Group and around 20 seniormost officials of customs and excise group had also opted to join the IRS.
When asked the matter had been challenged in the court, the FBR Chairman said the matter was sub judice and "we cannot speak on the legal aspects of its creation. The court would determine the legality of the issue. "If the court gives any kind of directive to the FBR on the IRS creation, the tax department would strictly follow the court orders," he added. He said that there was no major dispute on creation of the IRS, as only 10-20 officials had filed petitions in the courts.
Responding to a query on seniority issues, he categorically clarified that justice would be done to deal with the seniority issues of the customs and excise group. The office memorandum of the Establishment Division had already taken care of this most important issue of seniority. Under the OM, an anomaly committee, comprising Additional Secretary-II Establishment Division, FBR Chairman and Additional Secretary of Law and Justice Division, had been constituted, whose interpretation regarding the IRS would be final subject to approval of the Establishment Division, he said.
He admitted that seniority was a genuine concern of the tax officials under the new organisational set-up of the IRS. "I neither belong to Income Tax Group and nor Customs and Excise Group. I would ensure 100 percent justice for all tax officials as far as seniority is concerned."
He said that there were apprehensions of the customs and excise group that their promotion process would slowdown after creation of the IRS. However, Sohail Ahmed assured the entire tax machinery that the customs and excise officials would not face any problem in promotions under the new structure. "There is no compulsion for any customs official to join the IRs. If all customs officials would join new group, the service would be re-named as Pakistan Revenue Services," he said.
Referring to the audit, the FBR Chairman said that the separate audit of income tax and sales tax had created problems for the registered taxpayers. Around 120 countries, including regional countries, had implemented integrated tax system, he added.
He said that the government had witnessed 25 to 30 percent increase in remittances during the current fiscal. The implementation of the value-added tax (VAT) and the IRS would also play a key role in generating additional revenue and reduce deficit, he said, adding that the improvement in remittances, tax administration reforms and introduction of broad-based VAT would help in increasing revenue collection. The draft of the VAT law would be discussed in a conference to be held here on October 19-21.
He further said that the reforms in the tax administration would continue even after completion of World Bank-funded Tax Administration Reform Project (TARP). Even former FBR Chairman Abdullah Yusuf did not implement the decision for creation of the IRS. He remained as FBR Chairman for over four years, but why he had not created new occupational group, Sohail questioned.
Earlier, the FBR Chairman read a statement on the creation of the IRS. According to him, the integration of domestic taxes has initiated a debate in various publications. The Federal Board of Revenue is undergoing a reform process since 2002 with the objective of creating a vibrant taxation system. The creation of Inland Revenue Services is a part of the reforms and is in consonance with the best international practices.
In Pakistan, a bifurcated system of tax collection is followed where domestic Federal levies are partially collected by the Customs and Excise Group and partially by Income Tax Group. Such division at the administrative level is a major cause of revenue leakage. To plug these loopholes and to remove distortion in the revenue collection, he said remedial measures were taken after consultation with all the stakeholders, including officers of Customs and Excise Group and partially by Income Tax Group.
It was necessary to point out that the initial decision regarding handling of all domestic taxes, ie income tax, sales tax and Federal excise by one service group, was taken in 2004 when the FBR was headed by Riaz Ahmed Malik, who himself belonged to the Customs Services.
He said the taxation system was the backbone of any economy. The integrated system of domestic tax administration was being followed in more than 100 countries of the globe, as distinct from indirect taxes. The major challenge for revenue authorities, he said, was to increase the Tax-to-GDP ratio by enhancing the revenue collection. |The composite audit of the taxpayers is part and parcel of the Universal Self Assessment Scheme. The Integrated Tax Management and unified database will bring the desired results of enhancing the tax-to-GDP ratio.
"This is also a taxpayer-friendly mechanism as it will bring all domestic taxes under one widow," he said. The FBR Chairman visited a number of field units for the removal of misunderstandings and held negotiations with all the stakeholders. Due to this consultative approach, a vast majority of the officers has extended their support for integration of the taxation machinery and has given their option to join the newly created Inland Revenue Services. He said it seemed that some of the reported news was based on misunderstanding and narrow self-interest at the cost of public benefit.
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