ISLAMABAD, March 28: The World Bank has urged the government to increase its annual tax collection to Rs880 billion by drastically improving CBR’s audit functions and eliminating existing large scale leakages. Informed sources told Dawn here on Monday that the World Bank, which is providing Rs7.2 billion through its IDA credit for Rs10 billion Tax Administration Reform Programme (TRAP), wanted effective implementation of the reform strategy earlier approved for the Central Board of Revenue (CBR).

The Bank has asked the government to urgently hire specialised Technical Assistance (TA) firm in the areas of Process Re-engineering, Audit, Risk Management, Appeals and Dispute Resolution and Taxpayers Education and facilitation.

The government has informed the World Bank that input from the proposed TA firm and introduction of modern techniques were likely to increase the revenue collection to over Rs880 billion approximately after the completion of TRAP.

A special Project Management Unit has been set up in the CBR to monitor day to day activities/progress and evaluation of TRAP for which the government has given Rs100 million anticipatory approval for 2004-05. This funding, sources said, has been given to the CBR for completing documentation process on fast track basis for the TRAP project.

The sources said that the government has informed the World Bank that under the policy reform programme, further simple laws will be introduced in the budget for 2005-06 along with ensuring effective universal self-assessment, elimination of exemptions and less dependence on withholding taxes and having effective dispute resolution mechanism.

The government believed that by implementing TRAP, tax to GDP ratio will be increased to 0.2 per cent annually along with achieving financial and administrative autonomy by having certain required legal changes.

The sources said the World Bank has recently sought information on a number of issues with a view to making the CBR efficient in collecting increased revenues, minimising corrupt practices and discouraging unnecessary involvement of the government functionaries in the affairs of the CBR.

The government has told the Bank officials that the chairman was responsible of the tax reform. The responsibility for day-to-day coordination, management and monitoring rested with the Programme Management Unit (PMU) headed by the Member Tax Policy and Reform.

One of the prime objectives of the tax strategy, the Bank was told, was to develop effective working relationship with the taxpayers and other organizations which contribute to increasing compliance and improved services. The Model Tax Offices, MTUs and LTUs have already started working and apparently no risk factor has been noticed.

However, frequent changes in the leadership and lack of timely release of funds could have adverse effect on the life cycle of TRAP and might cause delay which off course needed to be avoided.

There will be Rs7.9 billion annual recurring expenditure of the project which, the Bank was assured, will be borne by the Government of Pakistan. Nevertheless, there would be hardly any additional financial impact of annual recurring expenditure on the budget and that the government was already bearing annual recurring expenditure of the CBR.

Also, construction of Transit Accommodation and refurbishment of existing building contracts for civil work was being awarded which also included construction of Model Customs Collectorate.

With the completion of TRAP, the World Bank was told, that there would be an increased voluntary compliance with the tax law through the application of concerted taxpayer education and facilitation programme. It also aimed at removing redundancies and re-engineering business process and bring taxpayers part of this reform programme by introducing effective self assessment at the beginning of the process, risk based assessment in the middle and targeted audit at the end. Also, it will enhance significantly staff productivity, efficiency and satisfaction through extensive training programme and enhanced salary structure for the employees of the organization.