Tax reforms: commission to focus on six policy areas

The Tax Reforms Commission constituted by Finance Minister Ishaq Dar would focus on six policy areas, ie, rates and modalities of sales tax collection, tariff reforms-protectionism vs trade liberalisation, functional vs circle-based jurisdictions in Inland Revenue, the FBR's autonomy, anti-smuggling enforcement capacity and effectiveness of the Alternate Dispute Resolution Mechanism.
In this regard, the Federal Board of Revenue (FBR) here on Tuesday circulated the decisions of the first meeting of Tax Reforms Commission to the members of the commissions and FBR senior officials for necessary action. According to the FBR, Chairman, FBR Tariq Bajwa also made a presentation before the Commission and highlighted the current position of tax-to-GDP ratio, tax mix showing contribution of various taxes in overall revenue. He also stressed the low tax base of Pakistan as percentage of population (0.5 percent as against India 4.7 percent and other countries being higher rate even of 80 percent). Chairman, FBR emphasised that reform has two aspects, ie, administrative and policy reforms and highlighted the key issues: Rates and Modalities of Sales Tax collection; Tariff Reforms - Protectionism Vs Trade Liberalization; Functional Vs Circle Based jurisdictions in Inland Revenue; FBR's autonomy - Options and Impact; Anti-Smuggling - Enforcement Capacity Issues and Alternate Dispute Resolution Mechanism - Making it effective.
The Finance Minister emphasised to include proposals to improve the appellate process in the said issues highlighted by the Chairman, FBR Chairman TRC Masood Naqvi, who made it clear that Commission will consider macro issues and will not take-up micro issues pertaining to specific taxpayers or group of taxpayers unless they have nexus with the macro issues. He requested the Chairman, FBR to give presentation on various topics which was agreed by the Chairman, FBR.
It was agreed that all Chambers will jointly hold their meetings and formulate joint proposals/recommendations. It was also decided that nominations from the bodies must be permanent and the same individual should represent his Organisation unless some other person expert in the specific area is required.
It was decided that all meetings of the Commission will be held at FBR (HQ) but exceptional meetings may also be held at Karachi or Lahore. The meeting may spread over one or two-days. Chairman FBR agreed to set-up a virtual office at FBR and one officer would be dedicated to look after the virtual office. Contact information including email IDs of members will be shared by that office.
Members of the Commission requested the Chairman, FBR that draft presentations from FBR side may be shared with members so that their queries may be included and answered. Chairman, FBR was of the view that presentations keep on changing till last minutes, therefore whatever is going to be shared would be provisional draft. He encouraged the members to submit their queries and the points on which they desire any explanation or presentation through the Chairman of the Commission.
Member of the commission Yaqoob Sattar emphasised that some criteria be set-up to evaluate the performance of the Commission. Chairman, FBR was of the view that performance of the Commission can be judged in short term as to how many recommendations of the Commission are accepted/implemented by the Government and on the medium and long term basis performance would be judged on the basis of increase in revenue, improvement in revenue administration, increase in tax-to-GDP ratio and broadening of the tax base and improving in equity in tax system.
Sattar's proposal for setting up a monitoring committee to oversee the implementation of the recommendations of the Commission was accepted by the members. Sattar was of the view to investigate the failure of Tax Administration Reform Project (TARP) and to find out reasons thereof but the Chairman, FBR was of the view to move on and remain focused on the TORs of the Commission. The Commission agreed to the Chairman, FBR proposal.
It was also agreed that any members of the TRC may seek information from the FBR through the Chairman, PRC and no member will communicate in its individual capacity on behalf of the Commission with the press and media.
The chairman of the Commission informed the members that in order to move forward he would constitute Committees for a focused discussion on various components of TOR and asked Members to indicate to the Chairman about their interest in serving on any of the following Committees: Tax Policy; Direct Taxation; Indirect Taxation; Sales Tax and Excise Duty; Customs; Administrative Reforms and any other Committee.
It was agreed that presentations will be made by members of FBR including Member (Customs), Member (IR-Policy), Member (IR-Operations), Member (Administration) and D.G (I&I). It was also agreed to hold next meeting in mid November, 2014.
In the inaugural address, the Finance Minister highlighted the challenges being faced by Pakistan's economy and specifically mentioned low tax to GDP ratio, fiscal deficit, SRO culture and other impediments in the growth of economy and revenue particularly. The Finance Minister expressed his resolve and commitment of the PML-N government to overcome the problems and challenges. Highlighting the areas, the Finance Minister stressed that the PML-N government brought down fiscal deficit from 8.8 percent to 8.2 percent in FY 2012-2013 and brought it further down to 5.7 percent in the last financial year. He stressed that his team is committed to bring it down to 4 percent. He also explained the austerity measures adopted by the PML-N government by reducing the expenditure and the efforts of the Government to bring macroeconomic stability which is reflected by the confidence of international donor agencies and financial institutions.
In the context of the TRC, he impressed upon the members of the Commission the great responsibility which has been given to them for putting up practical suggestions for improvement in tax administration and bringing meaningful reforms. The litmus test of the recommendations would be the implementability in the short term and increase in the revenue generation in the medium term. Chairman TRC Masood Naqvi thanked the Minister for his appointment and assured the Minister that he and his team would do their best to make positive contributions in this national task. Chairman, FBR assured the full co-operation and support to the Commission, the FBR added.