KARACHI, May 6: The Chairman of Central Board of Revenue Abdullah Yousuf acknowledged on Thursday evening that there was a huge gap and many loopholes in the sales tax system which need to be plugged. "Sales tax is relatively a new tax and we are going through a trial and error phase,"
the CBR Chairman stated while addressing a pre-budget seminar organized by the Management Association of Pakistan.
Earlier, the two speakers Masood Naqvi and Ibrahim Sidat in their detailed presentation did not mince words to declare Pakistan's taxation system corrupt, distorted and irrelevant to modern times and that it breeds poverty and harass honest tax payers.
The two speakers particularly noted the high 15 per cent rate of sales tax which impacts production cost and hurts consumers. They also spoke on the plight of 'captive class of fixed wage earners' in the taxation system and pleaded relief for them.
Abdullah Yousuf is the second Chairman of the CBR, who is not from taxation services and hence an outsider. The first such outsider Chairman was appointed by Nawaz Sharif in 1997 who was removed rather unceremoniously within a year of service. His younger brother then an executive in a nationalised bank was picked up by the police.
He identified the refund of about Rs100 billion every year as a "collosal problem" for which the taxation machinery is not geared at all. Of this he said about Rs50 billion refund is paid for sales tax and the remaining Rs50 billion for other taxes.
"We are working out a policy to reduce the level of advance tax thus reducing the need of refund," the CBR Chairman outlined the future strategy. "But future refund system will be such that would not involve human beings," he promised while indicating that it would be simple, automated and definitely avoid any contact as far as possible between the taxman and the receiver of refund.
He broadly hinted that such a system would be electronically operated and said that a process has been initiated in customs where a bill of entry could be lodged prior to arrival of ship.
This electronic clearance of consignments has been taken up as pilot project at one of the terminals of Karachi port which roughly handles 33 per cent of the cargo. Within next four to five months the system will pick up cases for random sampling on the basis of certain criteria to be worked out.
Introduction of Universal Self Assessment, he said was a major initiative that was by all means a very bold step taken for comfort and confidence of the tax payers. Abdullah Yousuf said that improvement being made to make system automated and efforts are under way to take bulk of appeals related problems away from the assessors.
He also referred to the comments made on the income tax cases being picked up for audit which if would have done by efficient people would not have resulted in public grumbling.
The CBR Chairman declared that the government was committed to going ahead with reforms proposed three years ago by the two committees headed by Syed Shahid Hussain and Saeed Qureshi.
We have no choice but to reform taxation services if we have to keep pace with globalization and regionalization and WTO and other international requirements. He cautioned the businessmen of the forthcoming security code being demanded by the US and endorsed by Europe for the cargo clearance and shipment.
Abdullah Yousuf said that the next budget would be growth and investment-oriented and facilitate a business friendly environment. "We can set growth target 6 per cent and even more that should address the growing poverty and unemployment problem in Pakistan."
But next budget is being presented in an environment when macroeconomic indicators are very stable and Pakistan offers a spectacle of opportunities. Earlier, the President of the MAP Javed Iqbal introduced the guest.
