ISLAMABAD, Feb 11: The government is planning to replace the existing 757 income tax circles with functional organization of income tax by the year 2004-05 as a part of the re-structuring of the tax administration.
Member Tax Policy and Reforms, M.S Lal told Dawn that under the new system, the existing cylindrical structure of income tax would be replaced by the functional organization and the tax administration would be performed on audit, enforcement, taxpayers education and information management system.
“This will bring efficiency gain due to large scale processing of data in 10 to 12 large size units, which will be known as regions under the new system”, he said.
Mr Lal said that in this regard, initially, on experimental basis, a functional organization structure has been introduced at Large Taxpayers Unit (LTU) at Karachi and Medium Taxpayers Unit (MTU) at Lahore.
The IMF/World Bank consultants, who were here to see the operation of functional organization has shown their satisfaction. They were of the opinion that the replacement of the circle system, where taxpayers has within the jurisdiction of tax collector by functional organization structure would reduce the one to one contact between the taxpayers and the tax collector thereby reducing the discretionary powers and corruption.
The member said that in case, the experiment succeeded by the end of 2004, the entire organization structure of the country would be changed accordingly.
According to the member, the government has worked out an interim reform strategy, which would be carried with the assistance of the World Bank. The World Bank has already provided grant to Pakistan for good governance and transparency. Of these some of the fund would be used for the interim reform strategy, said the member.
Elaborating the interim reform strategy, the member said that from next financial year a Large Taxpayers Unit (LTU) would be established at Lahore. With the establishment of the unit, the official said, around 50 per cent revenue of big businessmen of Lahore would be covered under this unit.
And the two LTU units one each at Karachi and Lahore would cover around 40 per cent of the total revenue, said the official.
Mr. Lal said that as a interim reform strategy, the tax authorities are planning to increase the numbers of taxpayers registered at MTU, Lahore to 40,000 to 50,000 from current 10,000. “This will give us an experiment to examine as to how many officers or auditors will be required to run one such unit,” he said.
The ultimate plan is to establish 12 units in the country, where work of collection, audit and enforcement would be carried out.
According to the member, the CBR is planning to establish 3- 4 MTUs as a part of interim strategy during the financial year 2003-04. The expected place for these units would be Gujranwalla, Sialkot, Hyderabad, Quetta and Peshawar, respectively.