World Bank (WB) has said that the Federal Board of Revenue (FBR) and the Ministry of Finance will prepare and publish an Annex to Tax Expenditure (cost of exemptions) including the list of further reductions in the number of existing tax exemptions and zero rating and their expected fiscal impact.
It was learnt here on Monday that the WB's new revenue mobilisation programme had talked about the revenue impact of reduction in the number of existing tax exemptions and zero ratings. According to the status of the list of key quantifiable outputs required under the revenue mobilisation programme of WB, the FBR and the Ministry of Finance had agreed to prepare and publish an Annex on Tax Expenditure in the 2012/13 budget, including the list of further reductions in the number of existing tax exemptions and zero rates and their expected fiscal impact. The methodology and format of such an 'Annex' will be prepared in consultation with the World Bank. This could not be achieved in 2011-12 (the Government decided to publish a tax expenditure note in the Economic Survey that suffer from severe technical deficiencies). Hence, this output has been postponed/or included in the budget FY13/14. An ad hoc Committee has been created to work on this, and a preliminary report has been produced on FY12 tax expenditure by a Consultant, but this report still is incomplete as it fails to cover all taxes (in particular income taxes) and it does not contain the required Annex with inventory of all tax exemptions and zero rates and their fiscal cost. The WB mission would like this activity to be concluded well before December 2012, WB report added.
The WB mission indicated its intention to develop important initiatives and requested FBR endorsement and support to them. These include: (a) a second brainstorming consultative session with FBR Board and key managers on the revamping of FBR strategy, focusing on defining the vision, objectives, the institutional gaps and requirements for change management and results: (b) the development of a small diagnostic tool kit benchmarking FBR tax administration with international standards (including Customs)-this could be done in anticipation to the mission: (c) the development of a study on the political economy of tax administration and policy reform in Pakistan: and (d) completion of' the tax expenditure study.
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