Govt working on capacity-based taxation for traders

Updated May 19 2020

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Finance adviser said the basic purpose of the exercise was to consult experts to seek suggestions and insights so that the fundamental problems in the tax collection could be effectively addressed. — AFP/File
Finance adviser said the basic purpose of the exercise was to consult experts to seek suggestions and insights so that the fundamental problems in the tax collection could be effectively addressed. — AFP/File

ISLAMABAD: The government is considering capacity-based taxation for traders across the country besides enforcing mandatory tax filing by maximum withholding taxpayers for increased tax collection.

Informed sources said the Adviser to PM on Finance & Revenue Dr Abdul Hafeez Shaikh has directed the Federal Board of Revenue (FBR) to engage with the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) and other chambers and trade bodies to cross-match data and cooperation.

The sources said the government had also engaged a leading tax Lawyer and Professor Dr Ikram ul Haq who has collected extensive data on potential taxpayers using electricity and telecom data on consumers and small, medium and large traders.

It has been noted that about four million electricity consumers were paying withholding taxes but were not paying tax returns. Similarly, there were about 13m cell phone users who were subject to withholding tax and a large number of them could be potential income taxpayers. There was, however, need to substantiate, collate and cross-match various data sets.

Dr Shaikh also met with Professor Haq to discuss proposals on improving the country’s tax structure with help of effective data gathering and reconciliation mechanism.

The adviser appreciated Dr Haq’s work on gathering data across the country from selected markets and from different commerce chambers. The professor also shared important inferences from data gathering exercises and recommended certain techniques to the adviser on data reconciliation that could improve tax collection in a more effective manner.

The adviser said the basic purpose of the exercise was to consult experts to seek suggestions and insights so that the fundamental problems in the tax collection could be effectively addressed. He said that as the government was preparing the next budget, authorities should be more vigilant, practical and analyse the opportunities and challenges offered by the current environment.

The government was ready to listen to all stakeholders to prepare a budget which is according to the need of prevailing economic circumstances and innovative in providing solutions to structural problems in the economy.

He asked Dr Haq to firm up his proposals in a concise and doable manner and share a draft as early as possible with the Ministry of Finance so that these proposals could be incorporated in the upcoming budget. He also directed the FBR to collect data through multiple sources that may be best used for effective budget making exercise.

Published in Dawn, May 19th, 2020