ISLAMABAD: The Federal Board of Revenue (FBR) has finalised a 3-Year Strategic Plan with lucrative incentives like ample reduction in sales tax rate from 16 to 10 percent; corporate income tax 35 to 30 percent while tax rate for Association of Persons(AOPs) and individuals would be brought down to a lower level. Sources told Business Recorder here on Saturday that the tax authorities have finalised a three-year strategic plan which would also be discussed with the International Monetary Fund (IMF).
The plan being shared with the Ministry of Finance has focused on expenditure based assessment of the potential individuals. According to the salient features of 3-Year Strategic Plan, if the tax-base expands with an addition of another 4 million people under the ongoing documentation drive, the FBR will make major reduction in tax rates. Once the tax base widens, the tax rates would be brought down.
The FBR is confident that the ongoing efforts would document 4 million people. Resultantly, major tax relief would be provided to existing taxpayers. The standard rate of sales tax would be cut from existing 16 to 10 percent; corporate income tax rate from 35 to 30 percent and other tax rates applicable on AOPs/individuals etc would also be reduced.
Under the 3-Year Strategic Plan, the FBR would be able to electronically document life pattern expenditure of the individuals for assessment of income tax. The FBR would workout the expenditures done by registered persons including 4 million potential individuals to be registered under the investment and registration schemes. Taking into account the expenditures made by any person, the FBR would be in a position to serve 'electronic notice' to the un-documented persons. The monitoring of the expenditures would be done with the help of electronic database and information available with the tax department. The assessment proceedings would be done as per law and complete information about the expenditures would be used to document each and every potential individual. The electronic assessment procedure is part of the whole scheme of documentation, sources said.
The 3-Year Strategic Plan also talks about major steps on the sales tax side. The bogus sales tax refunds and input tax adjustments would be checked with the help of risk-based system. The sales tax base would also be enlarged with the help of electronic data available with the tax department. The inadmissible input tax adjustments would be controlled through effective checking of sales tax invoices and purchases made within the supply chain of Value Added Tax (VAT). The sales tax collection would not only be increased by enforcing risk-based checking of refunds, but it would also bring buyers and sellers of supply chain within the sales tax net. The monthly filing of sales tax and federal excise returns would be made more effective by improving the existing system.
Sources further said that the checking of fake and flying invoices would be done with the help of electronic verification system to plug in the loopholes within the VAT regime.
Sources further explained that the 3-Year Strategic Plan would pay special attention to the border controls by the customs department. A new force of efficient customs staff would be deputed at border areas with customs pickets at all key check points. The border controls would be done by setting new check posts at all important stations and points where smuggling is taking place. The 3-Year Strategic Plan of the FBR has been finalised which would be instrumental in increasing Tax-to-GDP ratio of the country, sources added.