Spanner in the works

Published February 1, 2016
Chief Minister Shahbaz Sharif praying after the ground-breaking ceremony of the industrial park in Faisalabad. To quell resistance from service providers outside the tax net, the Punjab government issued an ordinance which has lapsed for want of endorsement by the provincial assembly.—APP file photo
Chief Minister Shahbaz Sharif praying after the ground-breaking ceremony of the industrial park in Faisalabad. To quell resistance from service providers outside the tax net, the Punjab government issued an ordinance which has lapsed for want of endorsement by the provincial assembly.—APP file photo

PERHAPS, the Punjab Revenue Authority is being vilified at a wrong time when it is struggling to become a model tax collecting agency in the country’s richest province criticised for its weak tax culture.

“Unlike the Federal Board of Revenue (FBR), the Punjab Revenue Authority (PRA), is a lean, technology savvy and efficient entity being operated by a motivated team focused on delivering its mandate,” says a tax expert.

Last week on a petition filed collectively by three travel agencies, the Lahore High Court declared the PRA illegal on procedural grounds.


Restaurant IMS streamlines transaction data from business place to the PRA database on real time basis, minimising the possibility of misreporting


Earlier the complainants were served notices to register with the authority. The notices carried a fine of Rs50,000 in case of their non-compliance.

The 18th Amendment awarded the provinces exclusive right to collect sales tax on services. The PRA was set up in June 2012 under the Punjab Sales Tax Act 2012.

To provide a legal shield to the functioning of the PRA and quell resistance from service providers outside the tax net, the Punjab government issued an ordinance. The law required the provincial assembly endorse the ordinance within 90 days after which it lapses. The expiry date of PRA Ordinance was Jan 19, 2016.

The Punjab Assembly, which has not met in the last two months, failed to endorse it in the specified time. Subsequently, in the very first hearing of the case against the PRA, the Lahore High Court,ignoring consequences of such a decision, declared it illegal.

“It is very unfortunate. The Lahore High Court could have acted differently. The onus of responsibility, however, rests with the PRA itself that was not able to push a bill through the provincial assembly where the ruling party enjoys absolute majority. It is not enough to do your part. The follow up is equally important,” an expert in the know of the situation told Dawn.

When reached over phone, the PRA officials sounded disappointed and were reluctant to offer a formal comment as the matter was sub judice. They did say that the authority was preparing to challenge the court decision.

“We did all what we could, but priorities of the provincial establishment lies elsewhere. They find cutting ribbons and drawing curtains on plaques too interesting to bother for building institutions, an exercise bereft of exciting publicity that demands consistent input without immediate results,” a member of the PRA team said hinting at Chief Minister Shahbaz Sharif’s preoccupation with pet infrastructure projects.

A week before the court decision, this scribe was briefed on the PRA’s work in its office in Lahore by Chairman Dr Raheel Siddiqui and Additional Commissioner Salman Ali. They took pride in distance covered since June 2012 and were upbeat and confident about the future.

The authority has identified 59 different services for effective taxation. These include, eateries, media, custom services, courier, telecommunication, insurance, financial services, brokers, franchise, IT, consultancies, recruitment, security, mining, business support, property dealers, fashion designers, architects, interior decorators, rent a car, auto dealers, industrial vending, call centres, labs, gyms, laundry, cable operators, TV producers and advertisements.

The tax revenue on services has doubled, they said, from Rs22bn in 2011-12 collected by the FBR to Rs43bn in 2014-15 and is expected to cross Rs60bn during 2015-16.. “To plug loopholes we have launched Restaurant Invoice Monitoring Scheme (RIMS) at 98 restaurants in Lahore. Yes, there is resistance but there is no going back as we are committed to judicious revenue mobilisation through modern and responsive tax management,” the PRA chairman said.

RIMS is considered a game changer as it streamlines transaction data from business place to the PRA database on real time basis, minimising the possibility of misreporting.

“The court decision has compromised the image of a body that was entrusted with a difficult task to begin with. Taxes are not paid without tears anywhere but forcing businesses, who have managed to dodge taxes and perceive service tax as penalty on their success was never considered easy,” lamented a senior member of PRA team.

Commenting on the PRA development, an official of Sindh government, was sarcastic. “Well, so much for the good governance in Punjab. It is fashionable in Islamabad to criticise Sindh and ruling party of the province. I say let the data speaks for itself. We have proven to be socially more responsible.”

“The biggest province and the biggest spender of consolidated resources should have been the biggest contributor to the national kitty. The current survey does not give the provincial breakup but from all I know Sindh is the largest contributor to overall revenue generation,” he argued.

While seeking to rectify procedural matters the PRA in a formal media response stated that it was important to take note of Punjab Revenue (Amendment) Ordinance 2015 which has sought to remedy similar issues. The court did not go into merits of any of the cases. The Punjab Sales Tax on Services Act, 2012 and Punjab Revenue Authority Act 2012 remain in the field as their operation has not been touched by the court order.

Published in Dawn, Business & Finance weekly, February 1st, 2016

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