EAC asks FBR to conduct tax gap analysis

The Economic Advisory Council (EAC) has directed the Federal Board of Revenue to conduct tax gap analysis to check the actual potential of revenue from sectors paying low taxes. Sources told Business Recorder here on Monday that the EAC has issued directives to the FBR pertaining to taxation and documentation of the economy.
Firstly, the FBR will submit proposals for bringing agriculture value chain into tax net. The agriculture value chain includes every step starting from original produce to manufacturing of finished products. When contacted, a senior government official said the documentation of agriculture value chain is more relevant on sales tax side. Within the Value Added Tax regime, the entire supply chain has been brought into the tax net. This proposal seemed to be in the same context of bringing agriculture value added chain within the GST regime, the official added.
Secondly, the EAC has directed the FBR to conduct a tax gap analysis, which would be conducted on basis of latest economic situation in the country. Thirdly, the FBR will submit a report on the phenomenon of under-invoicing from China. Fourthly, the FBR will submit report to the EAC on reforms in tax administration including Pakistan Revenue Automation Limited (Pral). According to sources, the council has primarily focused on the taxation of the agricultural sector and tax gap analysis.
During last meeting of the EAC, the council discussed the idea of taxing of all incomes irrespective of the source of origin including agriculture and service sector. The EAC had also decided to interact with all stakeholders. It was decided that the Planning Commission will chart a framework to operationalise the conceptual framework of growth strategy for the EAC and subsequent implementation by the government.
The EAC set up working groups to formulate recommendations in key areas such governance, energy, trade, taxation, capital markets, banking and agriculture among others. It was decided that the EAC would meet more frequently and the next meeting will be held before the end of April 2011 to finalise proposals for the Budget, the EAC added.