KARACHI: The Federal Board of Revenue (FBR) has sorted out major issues with regard to imposition of value-added tax (VAT) with the IMF and the World Bank during a recent meeting held in Dubai, official sources told Dawn.

The meeting, which was primarily convened to finalise the draft for the imposition of VAT, has agreed upon the time-line and many other important matters, sources added.

However, some differences between the World Bank and the FBR still exist but officials are hopeful of sorting these out before the next month.

One of the major differences between the FBR and the World Bank is with regard to a huge gap of around Rs800 billion being pointed out by the WB between revenue collected and the actual capacity.

The World Bank had been telling the FBR that the country’s economy had the capacity to generate more revenue and indicated a gap of around Rs800 billion.

The bank has been telling the board that large scale leakages and tax evasions are harming the economy and making it dependent on external resources, sources revealed.

Sources, said that although the FBR agrees with the WB on shortfall in revenue collection against the actual capacity but it does not accept the figures being presented by the bank and feel that the gap in revenue collection and actual capacity is much less.

The FBR is ready to impose VAT at the earliest but sources said that a step forward could only be made once the issue of resource distribution is settled by the National Finance Commission.

The government has entered into an agreement with the World Bank to replace GST with VAT. Sources said that presently, FBR was striving hard to give some shape to the new tax so that the full VAT mode is implemented.

The GST collection on services fall under the ambit of provinces but a consensus has to be reached on the arrangement on its collection by the federal government and its disbursement among the provinces.

The FBR sources hoped that during the upcoming meeting of the NFC on November 17-18 in Karachi some encouraging development will take place in this regard and things could move forward.

If all goes well, sources said, the FBR would be focusing to shift from the present GST mode to VAT mode and in this regard the board is presently holding meetings with trade and industry.

However, business community feels uncomfortable about the VAT as they think that it needs many other prerequisites, which could not be fulfilled at this stage and with present level of technology and literacy.