A World Bank (WB) review mission will visit the Federal Board of Revenue (FBR) from September 14 to 28, 2010 to review progress on the Tax Administration Reform Project (TARP), particularly the issues relating to data warehouse, FBR Information Management System (IMS) Wing and results of enforcement strategy to check non-compliant taxpayers.
Sources told Business Recorder here on Monday that the WB mission, headed by Carlos Silvani, will meet the FBR team of tax managers including FBR Chairman Sohail Ahmed. The WB mission would obtain update on the WB Action Plan for implementation of the reforms. The FBR has issued instructions to all members to submit the latest update on the reforms to the FBR Strategic Planning and Statistics Wing by September 2, 2010.
The WB action plan said that the fundamental changes recently introduced in the FBR's organisational structure, management capabilities, and the IT infrastructure should facilitate the envisioned advent of a more effective and equitable tax administration. These changes include the creation of the Inland Revenue Service, the establishment of a new functionally integrated organisation, and the amendments of domestic tax laws to make tax procedures consistent with the new FBR organisational structure, it added.
Officials said that the WB had extended the TARP up to December 31, 2010 and another extension up to December 2011 is also expected to be formally approved by the board of directors of the WB.
The FBR had requested a two-year extension in TARP. Presently, the WB has temporarily granted extension of the project up to December 31, 2010 and the second extension up to December 2011 is expected in coming days. The mission has started review of the quarterly performance of the FBR taking into account action plan given by the donor agency.
According to sources, an important issue to be discussed between the FBR and the WB is the status of the Directorate General of IMS Wing which is non-functional for the last many months. The FBR had set up the IMS Wing under reforms to play a supervisory role in IT related activities including procurement. In the past, the WB had repeatedly asked the FBR to remove overlapping of functions between the Pakistan Revenue Automaton Limited (PRAL), the IT arm of the FBR, and IMS Wing. Later, the FBR had constituted a committee headed by a senior tax official to check overlapping of functions between the PRAL and the IMS Wing. Taking into account the report of the committee, the FBR has moved a summary to the Finance Ministry to abolish the post of the DG IMS to reduce unnecessary expenditures. There was duplication of functions between the PRAL and the DG IMS Wing, which has also been highlighted by the WB.
During upcoming talks between the WB and the FBR, tax authorities would brief the review mission about the latest status of the IMS Wing and IT related functions that are part of the reforms.
The FBR Enforcement Wing would inform the mission about the enforcement actions taken against the non-compliant taxpayers particularly recovery from defaulters. The FBR would give a detailed presentation to the WB about the enforcement actions taken in 2009-2010 for broadening the tax base. The FBR had laid down performance rating benchmarks in terms of non-compliance ratios. Under the benchmark fixed for the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs), there should be less than one percent non-filers/short filers in LTUs; less than 7 percent medium size non-filers in RTOs and less than 20 percent small business entities non-filers in RTOs. The board had launched the enforcement plans for direct and indirect taxes to lay down systematic enforcement procedures and to evaluate their effectiveness through monthly reporting system for field formations. Resultantly, a large number of income tax/sales tax returns were enforced from registered and non-registered non-filers in 2009-10. An unobtrusive survey of business premises was launched a few months back and as a result 23,000 new taxpayers have been identified to date, sources said.
Under the Income Tax Ordinance 2001, a new concept of provisional assessments was introduced for non-filers and a 60 days time was provided after the provisional assessment on the basis of available facts/information, to enable the non-filers to furnish their returns. In case of default, the amendment provided for validation of demand through the provisional assessment. Despite making some headway there is, however, a need to further strengthen the enforcement action with respect to detection of new cases, sources added.
The mission will convene meetings with FBR Members Direct Policy and FBR Member Indirect Taxes Policy for an update on the implementation of the policy measures to broaden the tax-base. The issues relating to the Inland Revenue Service and integration of taxes would also come under discussion. The enforcement provisions of the Finance Act 2010 would be discussed between the FBR and the WB officials to check the level of compliance in the field formations. The mission members would also meet senior sales tax officials to know about the legal and technical issues raised by the business and trade regarding reformed GST 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 sales tax, income tax and federal excise duty.
During the 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. Tax authorities are expected to brief the WB about the new audit plan for (2010-11) and reasons for FBR failure to complete audit of cases selected through computerised balloting. The FBR had selected a total of 921 corporate entities and Associations of Persons (AOPs) through computerised random balloting for composite audit of sales tax and income tax for the Tax Year 2008. FBR Director General Human Resource Management (HRM) would brief the WB about the modifications in organisation, rules and HR polices, sources added.
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