The Tax Administration Advisors of the United States Agency for International Development (USAID) have recommended the Federal Board of Revenue that the field formations should not try to obtain information directly contacting withholding agents, but an electronic interface be created at FBR for dissemination of data to the field offices.
Sources told Business Recorder here on Thursday that the issue of improving compliance by the withholding agents was discussed during a meeting between the Competitiveness Support Fund (CSF) Advisors and the FBR team headed by FBR Chairman Salman Siddiqui. During the meeting, Abdullah Yousaf, Head of the USAID/CSF Tax Assistance Project Team informed the FBR that the main purpose of development of data warehouse project is to develop a system which will facilitate effective utilisation of third party information and data collected from external sources.
He explained that if a bank has headquarters in Karachi and branches all over the country, the FBR should create an electronic interface for collection of data from field offices. However, it is not appropriate that the tax department should physically approach all banks' branches for collection of withholding tax information. The electronic data should be available at the level of the Board, which could be further disseminated in the field formations to avoid physical interaction with the withholding agents.
There should be only one focal point at FBR Islamabad, which should be used for creating an electronic interface between the Board and the field formations. In this way, the electronic system can move forward and further action could be taken by the concerned field office on the basis of information available with the Board. The FBR has to establish electronic interface with all the withholding agents for obtaining data electronically to end physical interaction between the tax officials and taxpayers.
He emphasised that Director General Intelligence and Investigation (I&l) must develop a team which should go through the data, keep on making additions and after sorting out, send the useful information to the field formations. The FBR should develop a standard operating procedure (SOP) and the Project team will assist the Director General (I&I) in this regard.
Abdullah Yousaf said "field formations must not try to obtain information through direct contact with the taxpayers as it is presently causing harassment. The statements of information must be generated by the I&I Wing of FBR and sent to the Field formations". It may also be decided before hand whether only desk audit of the case should be conducted or the case will require a detailed audit based on the information available for which it should be selected after going through the entire process of selection.
Head of the USAID/CSF Tax Assistance Project Team added that the system has to be integrated for better working by adding third party information and especially information obtained from withholding agents. Abdullah Yousaf appreciated the addition of computerised national identity card number (CNIC) in the withholding statements and called it a fundamental change.
He suggested that a seminar on the withholding taxes be arranged for the withholding agents. The presidents of the banks should be invited in the seminar for implementation of the withholding tax strategy. The FBR should also prepare an authentic list of all the withholding agents in the country.
The FBR should also issue instructions to all the withholding agents to file complete withholding tax statements. Moreover, all withholding statements must be filed electronically. Head of the USAID/CSF Tax Assistance Project Team further suggested that the different sectors should be selected for eg manufacturer of cars and complete information must be obtained from them regarding tax withheld for broadening of tax a base.
He further suggested that Director General (l&l-IR) may be assigned the charge of Director General (Withholding). This means that the DG I&I Inland Revenue should be empowered to deal with the entire withholding tax regime. The Director Withholding should report to Director General (l&l-IR). Member (Admn) may be requested for this change in the organisational structure. The FBR should depute a specific team to go after the withholding agents, Abdullah Yousaf added.