KARACHI, July 31: The Federal Board of Revenue (FBR) has embarked on a plan to broaden the tax net and improve tax-to-GDP ratio from the present low level of 9 per cent to 15 per cent by 2015.
In order to achieve this target the number of taxpayers will be raised from 1.6 million to 4.690 million. Consequently, this will improve the tax-to-GDP ratio to 15 per cent and bring it at par with countries of the region.
The FBR is working on a two-pronged strategy to enhance the number of taxpayers. Firstly, it will concentrate on enforcement measures and secondly, on development and utilisation of data with the help of internal control cells (ICC).
All these measures would be implemented through regional tax offices (RTOs) being set up by the FBR in different cities of the country. In this connection the first RTO has already started functioning at Karachi and more are expected to start operating by the year end. In total around 12 RTOs are expected to be set up.
According to the data compiled by the FBR the country’s total population has been put at 169.270 million (based on US Census Bureau and Pakistan Demographic Survey 2003).
After deducting non-taxable segments like rural population (115.440 million), urban females (30.790 million), urban males under 19 years (17.010 million), urban males above 65 years (1.110 million) and overseas Pakistanis (1 million), the total taxable population comes to around 3.920 million. However, adding up to this 0.770 million working urban females, the actual tax paying population should come to around 4.690 million.
While there is no denying the fact that the tax-to-GDP ratio is a crucial measure of efficacy of a country’s tax system, more realistic approach is required to identify weak areas and then to address the issues.
The RTOs would be given the task to broaden tax net on collecting data of prospective taxpayers from institutions, trade bodies, and professionals.
Some of the bodies identified for this purpose, include Pakistan Medical Association, Pakistan Medical and Dental Council, educational institutions, artists, production houses, beauticians, event managers, tax bar associations, building control authority, major clubs, builders and real estate agents, shipping agents and other professionals.
It would be the duty of regional tax offices to cross match data with the master index and the Nadra data base (CNIC) to identify actionable areas and tax cases. This will also help to identify persons within these sectors liable to file tax returns and yet not discharging their statutory obligation.
Most of these functions would be carried out by internal control cell of each RTO as they would make internal checks to ensure that exemptions and reduced tax rate certificates are being issued in accordance with the provisions of the law.
The ICCs will also make efforts to expand the CVT pilot project and facilitate identification of buyers and sellers not covered by the master index. The data will be scanned through modern techniques. Presently, the data collected along with tax returns is processed by Pakistan Revenue Automation Limited (Pral), which takes a lot of time.