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FBR drags its feet on key reforms

Updated January 03, 2018

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ISLAMABAD: The Federal Board of Revenue (FBR) is back-pedalling on reform measures which were originally designed to block all loopholes in the tax administration system leading to revenue losses.

The reform measures were evolved as part of the Tax Reforms Commission’s recommendations and were tasked to the Tax Implementation Reform Committee (TIRC) led by its chairman, Special Assistant to Prime Minister on Revenue Haroon Akhtar Khan.

Talking to Dawn, an informed source within the FBR said the committee – which has a representation from the private sector – was not taken on board seriously by the tax authority’s top management.

“We held several meetings on all crucial reform measures but FBR officials are not serious to implement these deliberations,” said the source.

The source identified several measures which await approval for implementation despite lapse of several months.

One of the reform measures relates to the introduction of forensic audit for major companies, especially the telecom sector. TRC has been actively pursuing the FBR to introduce forensic audit.

The second big reform proposal was the introduction of electronic monitoring of tobacco products. Originally, it was agreed to introduce track and trace system for the tobacco industry from the start of the current fiscal year.

“We have almost finalised the system for curtailing tax evasion in the tobacco industry but some FBR officials are blocking the proposal,” the source added.

It is estimated that more than Rs30 billion per annum revenue was lost due to tax evasion in the tobacco industry.

It was also agreed to establish data connectivity with other departments for bringing more people under the tax net. “There is some progress on this account but overall it is very slow,” the source said.

According to the source, State Bank of Pakistan is willing to provide data on withholding taxes to the FBR. However, the response from the FBR is very slow, the source added.

The withholding agents withhold taxes but do not submit the same into the government exchequer. Another proposal was regarding the offer from Pakistan Banking Association on data sharing with the tax department.

TIRC also recommended registration of Rs25,000 and Rs40,000 bonds to check whitening of black money through these bonds. “The government is not willing to implement this reform measure either,” the source added.

The FBR high ups are also opposing the introduction of single page income tax return form, the source added.

“We have given several presentations to top government officials on these reforms,” the source said.

The current FBR team is only interested in temporary measures to raise money for achieving revenue target, the source added.

Published in Dawn, January 3rd, 2018