High tax rates reason for non-compliance: PRA chief

24 Jan, 2021

ISLAMABAD: The Punjab Revenue Authority (PRA) chairman Zain Sahi said the high rates of taxes remained the primary reason for non-compliance in Punjab.

The PRA chairman was speaking at a webinar titled ‘Towards a more innovative, effective and enabling provincial sales tax regime,’ jointly organised by the Sustainable Development Policy Institute (SDPI) and Sub National Governance (SNG), here on Saturday.

Sahi said in order to improve tax compliance in Punjab, in addition to nudge techniques, fiscal incentives were also introduced, including reduction in rates.

He highlighted that data from external sources was needed to identify taxpayers outside tax nets, but data analysis capabilities in the public sector also need improvements. Therefore, the PRA is willing to share its data with other government entities on reciprocal basis.

The experts in taxation and economy highlighted that tax-collection by the provinces is critical to ensure sustainable investments in human development; speakers from diverse backgrounds shared this viewpoint at the webinar.

Usman Khan, Innovation Lead, SNG Program, informed the participants that the SNG programme worked closely with the PRA to deploy an intelligent system. It aims to make integration of all government data on taxpayers easier and other data commercial available in the public domain, and thus, to use cross-referencing to identify new taxpayers.

It would also make the audit process of existing taxpayers smarter and more efficient. The system will use smart data techniques to identify the audit scope rather than a random selection, he added.

SDPI joint executive director was of view that to sustain investments in human development and enabling infrastructure, own revenues of provinces must grow by almost 20 percent per annum in the medium term – a point also stressed in Punjab Growth Strategy.

This dialogue is important to help reducing the trust deficit between taxpayers and tax authorities as well as improving overall capacities for evidence-use in tax bodies. The provinces are facing uncertainties related to federal transfers and reduction in development program in turn threatening the sustainability of the medium-term fiscal framework. If pandemic outlook prolongs, greater efforts towards provincial revenue mobilization would be required to sustain relief and recovery.

World Bank’s public sector specialist Irum Toqeer was of the view that the expansion of tax base and improved compliance will be challenging if tax authorities do not address limited use of existing taxpayers’ data, ICT constraints, and incomplete data automation within and across authorities.

Naveed Aziz, governance adviser, Foreign, Commonwealth and Development Office (FCDO), informed the participants that the FCDO has been working with both the federal and provincial governments, but any work done by donors has to be institutionalized for any change to materialize.

Claire Hutchings, Senior Portfolio Leader, Oxford Policy Management (OPM), on the occasion opined that incentives and motivations of all actors in the system need to be understood by revenue authorities to devise strategies for tax compliance through behavioural nudge techniques.

Gulalai Khan, Communications and Social Impact Adviser, SNG Program, earlier shared various dynamics of the topic and highlighted the importance of discourse on tax revenue mobilization by provinces.

Copyright Business Recorder, 2021

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