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FBR to simplify laws to undercut shadow economy

Updated May 19, 2017

ISLAMABAD: The Federal Board of Revenue (FBR) is expected to consider a set of proposals for documenting the informal economy through steps such as simplifying tax laws and discouraging the use of cash, an official source told Dawn on Thursday.

The Tax Reforms Commission (TRC) has also submitted a detailed plan to the FBR. It has been proposed that a high-level commission or committee should be set up to develop a specific plan, similar to the ones developed and being implemented in India and Turkey.

For instance, in its three-year action plan for 2011-13, Turkey took various actions to increase voluntary compliance, strengthen audit capacity, in­­crease deterrence and sanction, share data base and raise public awareness.

The committee would also monitor and evaluate the action plan, and identify actions to improve documentation.

The action plan will be initially developed for three years to minimise the size of the informal economy by at least 30 per cent.

According to the source, the FBR will revise upward the property valuation table to generate more revenue from the sector. “We have achieved significant progress by taxing the black money landed in real estate in the current fiscal year,” the source said.

Raising the values would also help document untaxed money in the real estate sector. Immoveable property is a sector where significant amount of untaxed money is parked, especially due to the difference in fair market value and the collector rates, which in most cases is less than 25pc of the fair market value.

A former TRC member told Dawn that the government has agreed on most of the recommendations of the committee to be considered in the upcoming budget.

One of the agreed proposals was the simplification of tax laws. “The committee has already submitted details to the FBR,” the TRC member said.

“We have also submitted details to facilitate taxpayers in the next budget,” he said, adding that services such as acquiring passport and travel should be linked with the filing of returns.

It was also proposed to seek information regarding the source when remittances exceed a certain limit. It has also been suggested that a national tax court or special tax benches should be set up to speed up the justice system.

Published in Dawn, May 19th, 2017