FBR fails to execute key reforms

The Federal Board of Revenue has failed to implement key taxation reforms agreed with the International Monetary Fund (IMF) in November 2008 as part of the $7.6 billion Stand By Arrangement. The major tax reforms that the government has failed to implement are the introduction of Reformed General Sales Tax (RGST) and reduction of sales tax exemptions and zero-rating.
The Pakistani authorities repeatedly renewed their commitment to press ahead with the introduction of a broad-based VAT in 2010-11. They recognised that time is of essence and emphasised that the introduction of a broad-based VAT in mid-2010 was a key pillar of their medium-term fiscal strategy.
Tax authorities had prepared a detailed time-bound action plan for VAT implementation, but the government was unable to introduce this key reform measure due to strong political resistance. There are around 70,000 to 80,000 registered persons and the number of sales taxpayers has yet to be expanded. For this purpose, sources informed this correspondent that its experts are analyzing different proposals for expansion of the sales tax base.
On the revenue side, the FBR committed to take steps to strengthen tax enforcement. Sources revealed that the FBR has sufficient data of un-documented individuals to take action against them under the enforcement measures but instead FBR has opted to introduce a tax registration scheme for documentation of potential tax payers instead of direct action against tax dodgers.
However, the FBR has enforced an important measure to ensure display of National Tax Numbers (NTN) outside the shops/retail outlets and business premises as per provisions of the income tax law. In this regard, the FBR has issued instructions to the field formations.
The government assured the IMF that an integrated tax administration organisation on a functional basis would be established at the FBR (integrating both the income tax and sales tax administration). The Inland Revenue Service comprising income tax and sales tax officials was established following integration of service group and integration of taxes is being done with the help of Integrated Tax Management System (ITMS).