A thorough review of the performance relating to the all important issue of broadening of tax base (income tax and sales tax) would be under taken at the 4th Chief Commissioners Conference scheduled to be held in Islamabad on July 23.
An extensive discussion on the monitoring of withholding tax agents of income tax and sales tax, however, tops the 10 point agenda drawn up by the Federal Board of Revenue (FBR) for the conference which would also indulge in the appraisal of past performance and draw strategy for 2011-12.
Needless to mention that broadening of the tax base has been highlighted as a desirable revenue generating measure necessary to contain the fiscal deficit to below 4.5 percent of GDP in FY 12 in the third quarterly report for the year 2010-2011 issued by the central board of the State Bank of Pakistan here on July 4.
According to the report revenue collection remained weak throughout most of the year, and Federal Board of Revenue (FBR) was only able to collect Rs 1,020 billion during July-March 2011, which represent 64 percent of the annual tax collection target. More importantly, tax collection did not show any growth in real terms, as it remained lower than the current inflation of 14 percent. Furthermore, the sectors experiencing growth still remain outside the tax net or are lightly taxed (eg agriculture and services).
The underperformance, according to the report is more evident for direct tax collection. During July-March 2011, FBR was able to collect only 58 percent of the target set for direct taxes. This is very low compared to the past average of 65 percent target achievements in nine months. Frequent postponement of deadlines for income tax returns, poor tracking of withholding taxes and institutional inefficiencies in raising 'collection-on-demand' through audits and inspections are key factors underlying the short fall in direct taxes.
The revenue shortfall is not peculiar to current year; for the last several years growth in tax has lagged nominal GDP growth. As a result, the tax/GDP ratio has fallen to below 10 percent, which is considerably lower than the average tax/GDP in comparable countries like India, Indonesia, and Sri Lanka, the report said.
Also included on the agenda is a review of sales tax filers/non-filers based on Pakistan Revenue Automation Limited (PRAL's) data, demand and collection, utilisation of data disseminated by the Board and strategy for 2011-12.
Other items include: discussion on amendments/new provisions enacted through Finance Act 2011, federal excise duty (franchises etc), refund management, ERS, Post Refund Audit etc (status of data disseminated by the Board), tax-payers audit performance evaluation, ground realities - policy for 2011-12, arrear stock income tax, sales tax, FED and recovery drive, automation - KPI's - TAMS - Cleansing of Master Index, information and deadlines given by the Board, and HR issues and fresh proposals.
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