KARACHI, Sept 26: The World Bank has suggested to the government to remove exemptions and waivers to improve tax-to-GDP ratio, which today stands amongst the lowest in the world at around 12 per cent.
After bringing in administrative reforms there is greater need of framing such tax policy, which could do away with exemptions and waivers that are causing revenue losses.
This was observed by senior financial sector specialist of the World Bank Mudassir H Khan during his visit to Large Taxpayers Unit (LTU) here on Monday. “The ad-hoc changes in policy results in revenue loss, therefore, the government should frame long-term and consistent tax policy,” he asserted.
The five-member World Bank mission on tax administration reform project is currently on a review mission and visiting newly set up Large Taxpayers Units and Medium Taxpayers Units established under reform agenda started by the CBR four years ago with $150 million funding of the World Bank.
Mr Khan said that area on which the government had to focus now was to frame such a tax policy, which could help improve tax-to-DGP ratio and this could only be achieved by broadening tax base.
After meeting the high-ups of the LTU, Karachi, members of the World Bank mission gave details of their findings to the newsmen. The World Bank team was led by Mudassir Khan and included Esperanza Lasagabastr senior financial economist of the bank and Ms Shabana Khawar senior operations officer. There were two consultants, Erik Puskar and Haseeb Ahmed.
Responding to a question Mr Khan said that the feedback about the working of LTU and its revenue collection was encouraging and expressed his satisfaction on reforms being carried out on the administrative side.
He further observed that there was a clear change in the mind-set of tax collecting agencies and overall culture has been made taxpayers’ friendly. Mudassir Khan said that it was also the duty of taxpayers to come forward and discharge their tax liability without fear and hesitation.
The World Bank had been monitoring the CBR’s reform agenda undertaken and there was a time when there was a resistance but now it had not only been implemented but there was also some good progress and results, he added.
Giving his observation about the LTU, Karachi, he said there is a regular growth in revenue collection as successive years have witnessed higher revenue target. There is prompt issuance of exemption certificate as well as refunds are being timely paid.
To another question, the World Bank representative said besides reviewing the working of revenue agencies the bank also made independent assessment of their performance by regularly getting feed-back from other sources including taxpayers.
“Undoubtedly there are still many problems and the CBR needs to do a lot but the direction is right,” he maintained. He agreed that rise in revenue collection could be attributed to higher economic activity but still some credit could be given to better performance of the revenue collecting agencies.
Member (policy and tax reform) CBR Khawaja Tanveer Ahmed who was leading his team of four from the CBR referring to a point for improving tax-to-GDP ratio said that CBR had already raised this issue with the World Bank to have technical support and to undertake a study for enhancing tax base. Once the spade work was carried out then they could move forward to achieve their goal of improving tax-to-GDP ratio, he added.
Director General LTU, Karachi Malik Bashir Ahmad who was leading his team of four apprised the World Bank mission of the progress made in tax reforms at LTU. It was followed by presentations made by Irfan Nadeem Commissioner (Enforcement and Collection Division) and Iftikhar Qutub, Collector, Sales Tax.
Issues related to revenue services, institutional development, taxpayer facilitation, information management systems, level of taxpayers response, role of tax consultants and integration of income and sales tax functions were discussed and reviewed. The performance of LTU in term of tax collection under various heads was also discussed in detail.
The mission members were informed that tax collection has improved as a result of tax reforms. The facility of electronic filing of returns is in place for the sales tax returns. The software has been developed to encourage filing of soft copies of the withholding tax statements. The process of audit selection has been developed under the risk management concept.
The members of the mission expressed their satisfaction over the progress made in all areas in general and in areas of revenue and taxpayer services in particular. It was also assured that the process of tax administration reforms would be pursued with the same spirit in future and it was expected that taxpayers would also reciprocate.
