ISLAMABAD, May 29: The government has decided to further rationalise tariffs and offer additional fiscal and non-fiscal incentives in the next budget for attracting more local and foreign investment, a senior government official told Dawn here on Tuesday.

“While some of the exemptions are likely to be withdrawn, the existing tariffs will also come down considerably in the budget for 2007-08,” Secretary General Revenue Division and Chairman Central Board of Revenue Abdullah Yousuf said.

“Protective walls in the shape of exemptions are needed to be removed so that the country gets adequate revenues,” he said.

He said without offering additional fiscal and non-fiscal incentives, it would be difficult to attract sizable local and foreign investment.

In 80s, he said, tariffs were as high as 120 per cent which had been gradually brought down to 25 per cent last year and will continue to be lowered. “Those days of higher tariffs are history,” he added.

Responding to a question, he said that the existing narrow tax base will be widened by brining more taxpayers in the tax net. The number of 1.8 million tax payers, he said, will have to be increased through third party information. However, he assured that no coercive methods will be used against the people. The current tax-to-GDP ratio which is less than 10 per cent will have to be enhanced by the government.

However, he made it clear that from next financial year, audit and monitoring systems will start functioning fully. In this regard, he referred to taxpayer facilitation offices in Karachi and Lahore and said guidelines have been issued to the concerned officials to provide every possible facility to the taxpayers.

“But now there will be an audit of income tax returns which remained suspended for well over three years,” Abdullah Yousuf asserted.

He said technical audit will be conducted as part of the self-assessment scheme. “But the auditors will not be allowed to misuse their authority,” he assured adding that not all the tax returns will be audited as it was not possible to take up the job on such a large-scale. “There will be limited audit the objective of which is to ensure that everybody files his or her return honestly and let me assure you that those people who are fair and honest do not have to be worried about any thing”.

In reply to a question, he said that he has proposed to the government to recover tax on agriculture income because no segment of society should be allowed to remain outside the next net.

Although the tax on agriculture income was a provincial issue, the government should reconsider it, he added. “When President Gen Pervez Musharraf visited CBR House earlier this year he had agreed in principle to impose tax on agriculture income,” he recalled.

Currently, Mr Yousuf said, provinces were recovering marginal tax on agriculture income on the basis of land holding.

However, he regretted that the agriculture sector being 25 per cent of the country’s GDP was not paying its due taxes.