Home »Editorials » Simplify tax collection procedures

After taking over as the new Chairman of CBR on Thursday, Mohammed Abdullah Yusuf underlined the need to create an investor-friendly atmosphere by changing the public perception about the tax collection machinery.

This, of course, is not the first time that a high official has promised to change the culture of CBR.

From time to time, the Finance Minister and others have been promising to bring about such a change, but a yawning gap remains between the stated policy and implementation work.

Talking about the reform process that he has in mind, Yusuf said that the functional structure of income tax would be fully automated, which will include electronic filing of tax returns by 2007.

The electronic filing of customs declaration and clearance, he disclosed, would be competed within the next few months while all work related to sales and income taxes as well as custom duty would be fully automated in another three years' time.

The changeover from a manual to a computerised system, it hardly needs saying, is important. But a more urgent change is required in the way the tax officials deal with various aspects of the tax collection system.

The CBR Chairman had reason to express appreciation for what he described as "a very positive change" in the tax agency's collection system. During the last few years, he noted, it has not only achieved targets, but also surpassed them.

What he also needs to note and do something about by way of creating an investor-friendly atmosphere is the other side of the picture.

It shows the field staff's single-minded focus on the attainment of tax collection targets, often at the cost of harassing the conscientious tax payers.

The field staff commonly drags the refund claims on and on so as to show higher collections in the record books, which not only creates cash flow problems for the taxpayer but also leads to misrepresentation in the real collection figures.

The all pervasive withholding tax regime, which covers 70 percent of collections, is a big, bothersome racket.

The withholding agents are required to deduct and deposit the withheld tax in the treasury within seven days.

The assessee whose tax has been deducted and who under the regime is to receive credit for such tax has to undergo an ordeal to get the credit from the tax department, particularly if a refund is to be made to the assessee.

The process is delayed endlessly for want of original challans under which the CBR agent deposited the tax in the treasury and in the case of multiple challans it is impossible for the assessee whose deducted tax was deposited through such challan to produce the original for getting credit for the tax paid.

Furthermore the production of original challans does not suffice, it needs to be verified from the Data Processing Centre that is supposed to be a service unit of the tax department but in reality functions as a fiefdom of its own.

To get credit for tax deposited through multiple challans is a nightmare. In principle there is the Federal Treasury Officer to process the credit to be given to each assessee on such challan which it does but at its own sweet pace and pleasure.

The Tax Facilitation Centres that have been opened by the CBR at each station under the ongoing reforms process are at most time a showpiece.

Their ability to provide facilitation is undermined by the lack of requisite on-line connectivity that is so essential to the nature of their function.

The withholding tax along with the turnover tax on the sales side, it may be recalled, was introduced some time ago to simplify the collection procedure; it has ended up complicating matters for the payees.

Fortunately, the new CBR chief is seized of the matter. He has said that the CBR should gradually get rid of the withholding tax as well as the turnover tax on the sales tax side.

That should go some way towards the achievement of his goal of creating a business-friendly atmosphere.

Yet another problem area is the Universal Self-assessment Scheme. Theoretically speaking, the CBR staff is required to complete its computation process within 45 days after the filing of the self-assessment returns.

It has been more than 70 days since the last date of the filing of these returns, and yet nobody has heard anything on the subject from the CBR.

We would welcome release of figures by the CBR with regard to the tall claims about provision of refunds upon completion of 45 days from filing of returns under this scheme.

The new CBR Chairman, having come from outside of the bureaucratic class, is expected to be particularly sensitive to the problems faced by genuine taxpayers.

In fact, while talking to journalists after his first day at work, he said that Pakistan's taxation regime is complicated and needs prompt attention.

More to the point, he observed, "The tax law should be so simple that an ordinary man can file income tax or sales tax return without consulting experts." One hopes he won't take long to translate these judicious words into action.

Copyright Business Recorder, 2004


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