LAHORE: Punjab’s own tax revenue is just 11per cent of its receipts which can be increased not just by improving tax administration but also by expanding taxpayers’ base. This will also help increase the national tax-to-GDP ratio at the national level.

One such opportunity to expand the number of taxpayers is by using the geographical information system (GIS) which has led to the redefinition of urban limits and thus extended the existing urban areas subject to assessment and collection of capital value tax (CVT) levied on urban immovable property.

In Sheikhupura, the GIS helped increase the rating area by 50% that significantly increased tax collection under the CVT head, said Sara Omar, who supervised the rating area extension exercise during her posting as additional district collector of Sheikhupura at that time.

Sheikhupura and Vehari were the two districts where DFID-funded sub-national governance programme was launched to promote the use of GIS for evidence-based decision making in key sectors, especially in health and education.

The identification of the new rating area in Sheikhupura to the tune of 10,622 acres, which is almost half of the existing rating area of 23,187 acres, helped quadruple CVT collection to Rs62.5 million in the quarter ending September 2015/2016 from a mere Rs15.7 million one year ago. The increase in CVT revenues in Sheikhupura is far greater than the increase in Mandi Bahauddin (a similar district where there is no GIS intervention).

“Initially, we used the GIS technology for monitoring education services in Sheikhupura district,” said Ms Umar.

“Later we thought of extending its scope for identification of new rating areas for the purpose of collecting CVT on immovable property. The exercise produced immediate results and we were able to quickly boost our CVT revenues by extending the urban boundaries of the district.”

The CVT is imposed on immovable property at a rate of two per cent of the value of property calculated based on DC notified rates as a fixed levy under The Punjab Finance Act, 2010, and the tax is applicable in urban areas as defined in the Punjab Urban Immovable Property Tax Act, 1958. Punjab has set a target of Rs12.6 billion under the CVT during the current financial year, 7.3% more than the previous year’s revised es timate. The CVT accounts for a little more than a fifth of the total revenues collected by the Board of Revenue over the past few years.

After the Sheikhupura experiment, the provincial government has an opportunity to replicate this exercise across the province for identifying and bringing into the tax net new rating areas.

However, the opportunity has not been fully exploited.

Asad Islam Mahni, member of the Board of Revenue (tax) insisted that the board had been extending the CVT rating areas every year. But he did not elaborate if the BoR had used GIS technology for accurate identification of new urban areas, what the quantum of such an increase in rating areas was, and whether and to what extent it led to increase in CVT collection.

Provincial Finance Minister Ayesha Ghaus Pasha maintains that the BoR continues to identify and extend the limits of existing urban areas, in a phased manner, every few years as is provided under the (Punjab UIPT) law.

“Besides, we also keep reviewing the DC rates of urban land on an annual basis leading to increase in the CVT collection,” she said.

Officials say the use of the GIS technology could help push CVT collection in Punjab by around Rs7 billion in just one year, a major potential source of revenue for the province.

“The province has indeed significantly increased its tax revenue in the last couple of years. But the existing tax base remains very narrow, as no tangible effort has been made to expand the number of taxpayers. The use of GIS technology for redrawing and extending limits of urban areas across the province can potentially add thousands of new taxpayers as has been demonstrated in case of Sheikhupura” said a finance department official.

Published in Dawn, November 21st, 2017