The Federal Board of Revenue (FBR) will brief the World Bank (WB) review mission on the proposed provisions of the Finance Act 2010 to harmonise income tax and sales tax penalties and introduction of Revenue Administration Act for smooth administrative functioning of the Board.
Sources told Business Recorder here on Friday that a WB mission is to visit Pakistan to review the Tax Administration Reform Project (TARP) from March 22-31, 2010. The mission, headed by Carlos Silvani, would meet FBR Chairman Sohail Ahmed and his team of tax managers to review the reform initiatives.
The mission would review the quarterly performance of the FBR taking into account action-plan given by the donor agency. The FBR would inform the WB officials that the Finance Act 2010 would introduce certain provisions to apply equal rate of penalties on similar nature of cases regarding non-compliance of the income and sales tax laws.
The mission will convene meetings with FBR Members Direct and Indirect Taxes to have an update on the implementation of the Value Added Tax (VAT). The mission members, including Orlando Reos, Paulo dos Santos, Wyatt Gant and Daniel Alvarez, would also meet Chief of VAT Iftikhar Qutub to know about the legal and technical issues raised by the business community regarding VAT implementation.
FBR Member Strategic Planning and Research would inform the WB officials about the latest status of TARP with progress on the action-plan for implementation of reforms. During meeting with FBR Member Legal, the FBR would brief the mission about introduction of a Revenue Administration Act to harmonise the administration-related issues of VAT, income tax and federal excise duty.
Sources said that the FBR would introduce a Revenue Administration Act to separately deal with the basic provisions of administrative procedures of income tax, VAT and excise duty. The administrative issues of these federal taxes should be exclusively handled under one proposed law ie Revenue Administration Act.
The proposed Act would also help in dealing with administrative issues of similar nature with respect to sales tax, income tax and federal excise duty. The proposed law would reduce compliance and administration cost, as well as harmonises the administrative procedures for the taxes.
The FBR Enforcement Wing would inform the mission about the enforcement actions taken against the non-compliant taxpayers particularly recovery from defaulters. The concerned officials would inform the WB about the cases where provision of section 122C (provisional assessment) of the Income Tax Ordinance 2001 has been invoked.
The tax officials would share the level of compliance due to enforcement action taken under the Enforcement Plan in the field formations. In this regard, the FBR Members Domestic Operations North/South would give an update on the implementation of the enforcement strategy.
During meeting with FBR Member Taxpayer's Audit, the WB would be informed about the use of risk-based selection for audit and review of audit performance indicators. The audit plan for corporate, association of persons (APOs) and individuals would be shared with WB officials. The WB mission would also have a meeting with the Institute of Chartered Accountant of Pakistan (ICAP) to have update on the corporate audit.
FBR Member Muhammad Ramzan Bhatti would present final report to remove overlapping of functions between Pakistan Revenue Automation Limited (PRAL) and Information Management System (IMS). About the penalty regime, sources said that presently, different penalties are applied to the same type of non-compliance in income tax and sales tax laws.
For example, there is a fine of Rs 5000 for not registering with the sales tax department, but there is no fine for not registering with the income tax department. The late payment of withheld tax is penalised under the income tax laws, but the same provision is not applicable on the sales tax.
Similarly, repeating erroneous calculation in the sales tax return is penalised under the sales tax laws, but not under income tax law. Sources added that the WB review mission would also visit Large Taxpayer Unit (LTU), Karachi and Regional Tax Office (RTO), Karachi to review operations of enforcement and audit plan as well as the operations of the IT system.
FBR Director General Human Resource Management (HRM) would brief the WB about the modifications in organisation, rules and HR polices. The issue of prolonged delay in promotions of over 900 sales tax auditors and senior auditors might be discussed during the TARP review, sources added.
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