The Federal Board of Revenue (FBR) will take measures in the budget (2016-17) to remove deficiencies in tax laws and plug in loopholes that are exploited to make investments in offshore companies aboard with a view to avoiding taxes at home.
Speaking as a guest in "Paisa Bolta Hai" with Anjum Ibrahim, on AAJ News, FBR Member and Spokesman Dr Muhammad Iqbal said that the Panama papers have exposed deficiencies in the tax system in developed countries as well as in under-developed countries. "We are trying to remove deficiencies in the tax laws to check tax avoidance in future. The tax system was exploited and amendments would be made in tax laws to plug in these loopholes for future purposes," he said.
Ashfaq Tola, Member Tax Reform Commission (TRC) and a renowned tax expert, said the TRC has already submitted recommendations to the government that a one-time amnesty scheme should be announced for resident Pakistanis having non-resident assets on payment of tax. They can declare their non-resident assets in their income tax returns filed with the FBR. This is a part of the overall recommendations of the TRC report and same was enforced by India last year. In India, they have implemented the scheme and out of their estimates of 6,770 crores, they generated 3,880 crores.
He said that the performance of the FBR for the last 2-3 years remained commendable. A growth over 20 percent has been witnessed during the current fiscal year due to administrative measures. The co-ordinated efforts of the FBR top management with a focused Special Assistant to the PM on Revenue Haroon Akhtar resulted in additional revenue generation during the ongoing fiscal year.
About withholding taxes, the FBR Spokesman said that any tax system cannot be effectively implemented till economy is fully documented. The FBR had one option: it must wait for someone to come and document the economy. However, the FBR has taken the initiative to impose withholding tax on some major transactions to document the economy and apply correct income tax assessments. The withholding taxes were imposed on big transactions keeping in view the patterns of consumption, expenditures and investments.
Claiming that the FBR''s revenue collection target is over-optimistic, he said that the FBR has achieved the assigned revenue collection target for first ten months of 2015-16.
Ashfaq Tola stated that the quantum of sales tax refunds considering targets moved in a specific range of 8 to 10 percent. He has also conducted an analysis on refunds. If it is assumed that the FBR has pending refunds of Rs 200 billion, a portion of Rs 40-50 billion refunds could be offset like refunds of DISCOs. There are many refunds which require proper scrutiny prior to issuance.
Referring to the recommendations of the TRC, he said the commission has proposed short-term and long term recommendations.