December 17, 2006	Sunday	Ziqa'ad 25, 1427

KARACHI, Dec 16: The Central Board of Revenue (CBR) will set up 30 regional tax offices (RTOs) and 70 tax facilitation centres throughout the country to collect internal taxes, including income tax, sales tax and excise duty which are now becoming major source of revenue collection.

Unlike in the past when major chunk of revenue collection used to come from international trade through customs duties, there is growing collection of revenue from internal taxes. Consequently, there is a need to further develop infrastructure and provide facilitation to tax collecting machinery to make it efficient and transparent.

This was disclosed by Abdullah Yousuf, chairman, Central Board of Revenue (CBR), at a recently held seminar, organized by the Income Tax Bar Association Karachi (ITBAK), in collaboration with the Institute of Chartered Accountants (ICAP). He further stated all these RTOs would be linked with one system, to be known as Tax Management System.

Therefore, filing of tax returns under Universal Self-Assessment Scheme (USAS) could be made electronically and its process would also be automated. The entire system is presently undergoing integration and a single identifier number would be selected either in the NIC or CNIC.

The chairman said the core policy of the CBR is now based on providing service for compliant taxpayers and there would be an enforcement wing for those who do not comply. A third-party information is also being developed to identify and search taxpayers, he added.

During the last couple of years, Mr Yousuf said a backlog of around 78,000 cases had been cleared or settled and presently there were around pending 12,000 cases of appeal. As a result of this, he said, the number of commissioners of appeal has been brought down from 34 to 11, and next year they would be further reduced to six commissioners.

Similarly, he said there were around 18,000 appeal cases at tribunal level, while around 24,000 cases of indirect taxation were before the Supreme Court, and after the formation of special benches, over 80 per cent of cases had been either decided or settled. However, he said now the CBR would approach the high courts to get all tax appeals and cases settled at the earliest so that we can start next fiscal year (2007-08) with a clean slate.

Above all, he said litigation was not helping taxpayers or tax collectors and was only there to show outstanding revenue amounts which would have never been collected.

However, the CBR chief stressed the need for improving tax-to-GDP ratio and said there was no other way to sustain current economic growth if we do not improve revenue collection as it was badly needed to maintain infrastructural development pace with the growth of trade and industry.

However, up to last year, there was an encouraging growth in revenue collection as CBR managed to surpass the target by Rs23 billion at Rs713 billion in revenue collection. However, there was still a wide gap and there were areas which do have potential of giving more revenue to the national exchequer and they would be tapped at the first instance.

Citing an example, Abdullah Yousuf said textile sector, being around 50 per cent of the manufacturing sector which contributes around nine per cent to the GDP, is paying minimum amount towards taxes and revenue collection. The agriculture sector contributes around 25 per cent to the GDP, services sector 55 per cent, wholesale 16 per cent and retail 12 per cent, but when looked at their revenue contribution amount, they stand far less than they should pay.

Consequently, there was a greater need to plug the gap between original potential and the current amount being received from these sectors, he said, and added that only then the country could ensure sustained economic growth.

Taking the example of Chinese economic growth which had even touched double digit at times, the CBR chairman said for the last 20 years, their rate of growth had been tremendous. He said China is attracting $40 to $50 billion foreign direct investment (DFI) which at a time touched $72 billion a year.

Pakistan also needs that sort of FDI if we have to remove poverty and create employment, but our country held chattered tax history as we had been following Customs Act 1816. All-round reforms and automation were needed to make tax collecting exercise transparent, efficient and free of corruption.

However, the on-going reforms agenda which started in 2001 has started producing good results and it is hoped that if we keep on moving on these lines and on the parameters set by Shahid Hussain Burkey, former vice president of the World Bank, the revenue collection system would not only ensure higher revenue collection, but would also ensure transparency.