KARACHI, July 19: Tax consultants and experts fear that the government may lose billions of rupees in revenue under its new Universal Self-Assessment Scheme (USAS) made available to around 292 large size taxpayers who are being provided with ultra modern facilities under newly established Large Taxpayer Unit (LTU) in Karachi.
The cases of all these taxpayers who had been paying Rs25 million and above have been selected and transferred from corporate region, Karachi to the newly inaugurated (July 1, 2002), lavishly decorated and furnished LTU located at PIC Towers.
All these funds are being used out of $250 million given by the IMF for revamping the Central Board of Revenue (CBR), but tax experts doubt about any improvement in revenue collection even after providing extra modern facilities to taxpayers because no where in the world tax is given with a smile.
High-ups of local tax department told Dawn that the entire corporate region, Karachi, annually used to give Rs35 billion in revenue. However, after transferring 292 cases to LTU around Rs30 billion is being estimated to be collected by this unit and a balance of Rs5 billion by the corporate region, Karachi.
But tax consultants and experts doubt about the outcome of the new scheme and fear that the government would suffer huge revenue losses when under new ordinance taxpayers from new year will be allowed to file their returns under Universal Self-Assessment Scheme.
These experts further said that under new ordinance the LTU will have to accept the returns irrespective of loss or income declared by taxpayers and only 15 per cent of these (292 cases) i.e. 45 cases will be selected for detailed audit.
The question arises, does the income tax department or CBR for that matter expects to collect Rs30 billion out of 45 cases because the remaining 247 cases may get away with huge taxes under the cover of Universal Self-Assessment Scheme, tax experts point out.
All these moves of facilitating taxpayers are being taken because of the fact that lately there had been strong move within CBR that revenue could be better collected through voluntary compliance.
However, tax experts have different view and they believe that no where in the world including advanced and developed world a theory of voluntary compliance is applied.
If this system is allowed to work, another tax expert said, it would mean that income tax department will either have to facilitate taxpayers or penalize the 15 per cent to that extent that a revenue target of Rs30 billion is met.
However, if the USAS is withdrawn and normal assessment with audit is carried out for 292 cases, as had been done in the past, on an average Rs100 million will have to be paid by each taxpayer towards taxes to the national exchequer.
A high official of local tax department said that prior to opening of LTU the corporate region, Karachi used to collect Rs35 billion in revenue but now it will have to collect Rs5 billion only.
But it is alarming that for collecting paltry amount of Rs5 billion the original strength of staff and officers of corporate region, Karachi, remains at the same. The region is divided into six zones. Besides regional commissioner who heads the region, there are six commissioners, 18 additional commissioners, 55 deputy commissioners. Strength of staff members including UDCs, inspectors, superintendents, etc., comes to 650.
On the other hand, the ultra modern and Large Taxpayer Unit, Karachi, have grade 21 director general at the top, four commissioners, six additional commissioners, 18 deputy commissioners, while strength of staff members is only 20, because the LTU is fully automated and have computers.
Similarly, the government plans to open small and medium taxpayer unit at Lahore. However, tax consultants argue that why such experiments are being done, which had never worked in any part of the world for collecting revenue.