March 22, 2003	Saturday	Muharram 18, 1424

ISLAMABAD, March 21: The International Monetary Fund (IMF) has recommended the Central Board of Revenue (CBR) to amend further the Sales Tax Act for bringing more potential taxpayers in the tax net.

Official sources told Dawn on Thursday that the Fund’s recommendation came following the observation that many people liable for sales tax appeared to have evaded the registration with the sales tax department.

It was also observed that the tax administration practices were also one of the reasons of discouraging businesses from enrollment, which was clear from the fact that compliance by current registered and enrolled taxpayers was very poor.

According to the IMF’s recommendations, the tax authorities were asked to amend the law to enable sales tax and income tax auditors to assess tax liabilities on the basis of indirect methods of determination.

The Fund further said to reconstruct income statements and presumptive criteria and to authorize the CBR to make an order for assessment of tax, penalty and additional tax on the basis of these criteria.

The CBR was also recommended to create units in each sales tax collectorate to regularly carry out investigative procedures to identify persons liable for enrollment or registration on the basis of their records or on turnover presumed on the basis of established criteria.

It was also proposed to allow input tax credit for sales tax payable on purchases or importations of all goods and services used in taxable activities with the possible exception of food and beverages and passenger vehicles.

The Fund proposed to CBR to increase the 3pc further tax on sales to non-taxpayers and the current 2pc tax on turnover to 5 per cent and provide that taxpayers other than manufacturers, might deduct 3pc of the value invoice obtained for purchases or importations of goods for their taxable operations in that period up to the amount of taxable turnover in that period.