According to the budget proposals of OICCI for 2017-18, Protection of Economic Reforms Act 1992 should be amended appropriately to check practice of remitting undeclared income outside Pakistan and the same being brought into Pakistan through banking channels in Foreign Exchange, thereby "whitening" the unexplained money at a minimal cost.
It recommended that the section 111(4) of the Income Tax Ordinance 2001 should be amended to restrict tax free inward foreign remittances to immediate family members. Only FBR should implement the recommendations of the TRC and also hold regular roundtable conferences with leading tax and legal experts to review existing laws for enlarging the number of tax payers and taxable entities, it added.
The OICCI also recommended incentives for timely filing of income tax returns by individuals including non-salaried class from next fiscal (2017-18). According to the budget proposals of OICCI for 2017-18, the tax rebate at the rate of 5% of tax liability should be given to all persons for filing return of income with wealth statement within the due date, given in the income Tax Ordinance, to encourage and promote return filing culture.
Those tax assesses who have failed to file the return but have already duly paid their tax liability, like the salaried employees, should be given a one-time waiver to file tax returns for prior years, if not done so. This will substantially enhance the number of tax filers and provide a support to the documentation initiative of the government, it recommended.
Regular Coordination between Federal and Provincial Revenue authorities: Last year OICCI played a pivotal role in the quick and smooth resolution of the issue which had arisen due to disallowance of input sales tax on services paid to provincial revenue boards. We appreciate the positive attitude of the FBR and Sindh Revenue Board (SRB) in this regard. The OICCI urges all the revenue authorities to continue this effective engagement in proactively resolving all other issues including synchronisation of the policies, standard tax rates and removal of all anomalies/ conflicts between the laws of the different revenue boards. Policymakers should always bear in mind that foreign investors, as represented in OICCI, have invested in Pakistan and not in any particular province and, therefore, should not be made to suffer pending resolution of inter-governmental issues/conflict.
Effective enforcement for Broadening the Tax Base: There should be effective enforcement of existing laws, without entering into the realm of harassment, and empowering the directorate of "broadening the tax base" to enable the tax collection machinery to identify sectors which have high earnings but pay very little taxes, or sometimes do not pay any taxes. The role of the tax officer is a very crucial one for tax broadening and documenting of the economy. It is alleged that there is a huge tax evasion by a cross section of high earners - professionals like doctors, artists, lawyers, dress designers, models, event managers, sales & marketing people running different businesses from their homes or offices in the back streets or just through the cell system, etc. Taxing the correct income of all these professionals has the potential to add significant revenues to the government treasury.
It is recommended that appropriate laws should be made to enable the government to seize local assets, in equivalent value, or levy punitive taxes, if any person holds any kind of assets outside the country for which source of income could not be established.
The Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) should jointly engage with the senior hierarchy of financial institutions and leading business chambers, like the OICCI, to make a secure and safe framework to ensure all customers of financial institutions whose account shows turnover in excess of PKR one million during the year, have filed a tax return and wealth statement. This could be done by the financial institutions simply notifying the names and CNIC numbers of their customers to the FBR without giving access to bank accounts to FBR official.
Art exhibition halls, hospitals where doctors practice, hotels holding large receptions for catwalks & sale of branded/designer dresses, airlines, travel agencies, etc should provide names and addresses of the respective persons involved in these business activities to the FBR on a quarterly basis. Once the FBR receives the above information, income tax return forms should be sent to all such persons requiring them to file tax returns - rather than waiting for the tax returns to be filed, the FBR should be pro-active and pursue potential tax payers.
Introduce accountability in tax administration: Despite several legislative measures to make the laws more robust and enforcement more effective, the fact is that, since 1998 the tax/GDP ratio has been continuously declining. In order to bring the tax administration in line with the other regional countries, the reliance on withholding taxes should be reduced and enforcement should be made more robust and effective.
The image of tax collector plays a very pivotal role in collecting taxes. However, the rampant corruption, without any real accountability of underperformers in delivering optimal collections from income tax, sales tax, customs and excise combined with brazen misuse of power are the reasons behind the inefficiency of the tax machinery and therefore, this needs to be corrected.
It is recommended that element of corruption should be eliminated or minimised by taking strong action and making a few examples through strong accountability. The internal control processes of FBR should be reviewed and its operation and effectiveness should be ensured by the establishment of an internal monitoring board comprising of professionals and business executives to oversee the transparency in FBR, which should report to the FBR board of directors.
The performance of the tax collectors should not be judged solely on the basis of tax collected, but their efforts on documentation and broadening side should be appreciated and rewarded. Restructuring of FBR as an independent governing body: The FBR should be made an autonomous body on similar lines as State Bank of Pakistan and Internal Revenue Services (IRS) of the United States. The FBR should be subject to independent audit by international experts to protect privacy of data and develop international norms.
The Federal Tax Ombudsman should be entrusted to settle all the disputed claims of taxpayers, as the taxpayers seem to have lost confidence in the dispute resolution mechanism under direct control of the FBR and to avoid lengthy and expensive litigations.
It has become an administration norm and tool to generate revenue through conducting multiple audits/reviews, of large taxpayers for the same or successive years under different provisions of the Income Tax Ordinance, 2001. This is giving rise to disputes on account of challenging the vires of the authority and legislation.
Only one audit/review should be conducted for an entity with regard to a particular tax year. After an audit/review is conducted that entity should not be subject to any audit/review for the next three years, unless a misdemeanour has been noted. This initiative will assist FBR in winning the confidence of tax payers who are good corporate citizens' thus making way for further investments, reducing administrative hassles, releasing resources for operations and thus potential tax increases, it recommended.
In reconciling & tracing the difference in the withholding statements, there is no facility or option available on the IRIS web portal to download the file on "XLS" format. Manual copy & paste of the statement is causing wastage of time and energy to trace the differences. Further, there is no print option of detailed file.
There should be options to download the statement on "XLS" and "PDF' formats should be provided to promptly reconcile the difference & avoid time loss & embarrassment of the tax payer. Further, there should be option to print detailed file. A tool should be provided in sales tax return to download on XLS all annexure of sales tax return to check & reconcile the customer/supplier data.
Downloading will avoid wastage of time/money & energy of the sales tax return filer & lead to the efficiency & compliance of sales tax return filing deadline. XLS download option will accelerate the reconciling process & lead to accuracy & transparency in filing of withholding statement by the company/withholding agents, the OICCI added.
Copyright Business Recorder, 2017