The Federal Board of Revenue (FBR) should introduce the "Inland Revenue Act" following harmonisation and integration of taxes under the reform process. Tax consultants told Business Recorder on Thursday that the FBR committees on the harmonisation of tax laws should examine the possibility of introducing "Inland Revenue Act" after integration of sales tax and income tax.
Tax professionals also suggested that the "Inland Revenue Act" should replace the existing Sales Tax Act, 1990, Federal Excise Act and Income Tax Ordinance 2001 under long term plan. The "Inland Revenue Act" should deal with the sales tax, income tax and Federal excise.
On the similar pattern, income tax and sales tax should have a single name like "inland revenue." Giving rationale of the suggestion, tax experts were of the view that there should be a common act for all three Federal taxes, ie sales tax, income tax and Federal excise duty, following establishment of the FBR Inland Revenue Wing.
The FBR is providing all income tax, sales tax and excise related services under one roof to the taxpayers. A simplified combined law would further facilitate the business community for which the FBR should explore possibility for "Inland Revenue Act". Therefore, a single act should deal with all the taxes under the harmonisation of taxes exercise, they suggested.
Presently, different committees of FBR Legal Wing and Tax Policy and Reforms Wing are reviewing tax law for harmonisation purposes. Another FBR committee, headed by FBR Member, Enforcement, is also reviewing the business processes re-engineering (BPR) under the reforms programme, they opined.
Tax professional further suggested that the harmonisation committees of the FBR should also examine the accounting procedures and financial systems under the reforms. The further synchronisation of income tax and sales tax would be required under the revamped tax machinery.
It is worth mentioning that the FBR had constituted special committees to review the tax laws for harmonisation of income tax and sales tax in a systematic manner. In the long term, this would have positive impact of revenue collection.
So far, the FBR has taken many steps to harmonise tax laws. The Alternative Dispute Resolution (ADR) laws have been harmonised. Other measures implemented included harmonisation of penalties/additional taxes regime; time period for adjudication and appeals.
The sales tax officials could effectively use following the integration of sales tax and income tax laws, the books of accounts, maintained by the income tax department. Secondly, sales on the income tax and sales tax sides would also be verified effectively.
Under Section 4 of the Federal Board of Revenue Act, the Board will exercise powers and perform all such functions that are necessary to implement the tax administration reforms. This section has wide scope for implementation of reforms, including harmonisation of tax laws, tax professionals added.