THE Federal Board of Revenue (FBR) has problems mainly due to its overreliance on indirect taxes.

Almost 60pc of tax collection is via withholding taxes. Taxpayers like the salariat, importers and small business entities are the ultimate victims of the FBR’s highhandedness. The exercise of tax collection comes to naught at the end of the day. Because, be it an income tax or sales tax withholding revenue, ultimately the source is adjustable, and FBR claims remain at manipulating figures.

However, this causes great suffering for the registered persons under the sales tax law and for prescribed persons under the definition of income tax law. All this exercise puts liability on such transacting persons to go after registered buyers and collect information and challans.

Meanwhile, this task of the FBR officials becomes the burden of taxpayers and increases their workload and cost of money.

Moreover, the challenge of documentation of the economy and streamlining of the taxation system suffers miserably. By this, it is a manufacturer who becomes a target of the double-edged weapon.

Other businesspeople like importers and exporters get away with deduction of their final tax and they simply file tax statement and not a proper tax return.

This is helped by threshold of Rs1m, where taxpayers avoid filing the wealth statement by under-valuing their declared taxable income.

The FBR has to come up with an innovative strategy to do away with these loopholes. It should also concentrate on completing general sales tax cycle, i.e. from import to retail. It should remove the threshold and adopt horizontal and vertical tax equity.

Abraiz Muzaffar Shaikh

Karachi