LAHORE, March 22: Serious differences exist in the Central Board of Revenue (CBR) on the issue of introducing Universal Self Assessment Scheme from the next fiscal year because its opponents insist that it will take away the powers of the tax collectors to plug evasion.
“Well, yes, there exists a difference of opinion in the CBR on the implementation of the scheme,” said a senior CBR official who asked not to be named. He added the “government was determined to go ahead with its plan to introduce the scheme despite opposition because both the prime minister’s adviser on finance, Shaukat Aziz, and CBR chairman Riaz Malik are great exponents of it.”
The federal government had announced introducing the USAS from July 1, 2003, in the budget for the current fiscal year. The USAS is said by its critics to have been introduced on the “insistence of the International Monetary Fund (IMF) to reform the tax system”.
“The committee, which was constituted to give its proposals to overhaul the tax system, had recommended to introduce the USAS in complete disregard of the ground realities of our society just to please the IMF,” said an income tax department official.
He admitted that the universal self-assessment scheme had been working pretty well in the countries whose economies were completely documented and which had a very high literacy rate.
“People all over the world are generally averse to paying tax. In the documented economies, they don’t have any other option but to declare their actual incomes. It is their fear of being caught that obliges them to declare their correct incomes,” the official said. “But it is not so in Pakistan with an economy which largely remains undocumented. Besides, we also have an extremely poor tax compliance ratio,” the official said.
He stated the scheme had little chances of success in Pakistan because “it would take away all powers from the tax collectors to challenge the tax returns filed under it without a solid evidence of evasion”. “On the other hand it has given the taxpayers total, unbridled freedom.”
He was of the opinion that the “black economy would thrive and tax revenue drop if the USAS was actually implemented because the tax collectors would lack powers to challenge the income declared by a taxpayer”.
He claimed that the only means available to the tax collectors for detecting evasion would be the record of the utility bills or property or vehicles owned by a taxpayer. But, he stated, “it was almost impossible to lay hands on solid evidence to challenge the declaration by a taxpayer under the USAS”.
He insisted that the utility bills seldom represented the true income of a household/entity while property and vehicles were the safest modes of concealing ill-gotten money because people didn’t require National Tax Number (NTN) for the purchase of property or vehicles.
Asked if any official had ever raised a voice against the USAS since its announcement, the official said: “Yes our point of view was raised at various meetings. But nobody would insist on it for fear of losing his job.”