The FTO office said that the arrest of taxpayers by the Intelligence and Investigation Wing of Inland Revenue is highly agitating. It is emphasized that intelligence and investigation authorities should not be allowed to negotiate amount of tax to be deposited by the taxpayers. Rather they should make contravention reports which should be adjudicated by the adjudication authorities after issuing of show cause notices. Coercive measures in term of sections 25 and 38 of the Sales Tax should not be taken till the matter is finalized under section 11 of the Sales Tax Act, 1990.
To make the taxation system effective, the globally accepted principle of separation of tax policy, collection of revenue and adjudication is needed to be adopted. For that, it is recommended by the FTO that the Revenue Division needs to be made functional as an independent and competent body with adequate participation of private sector.
The role of FBR to be restricted to revenue collection within the policy frame work set by the Revenue Division. FBR should comprise of independent Members instead of FBR employees.
For providing fair and effective judicial adjudication system, departmental adjudication level and Commissioner of Appeals may be dispensed with and an independent National Tax Tribunal (NTT) may be constituted under Ministry of Law or the Supreme Court of Pakistan. The proposed NTT should consist of a judicial member (qualified to be appointed as a judge of the high court) and an accountant member.
The FBR should establish Taxpayers Integrated Information System linked with CNIC/NTN. Every transaction involving banks, utility bills, purchase of moveable and immovable property, air travel tickets, payment of educational institutions fees, etc, be linked with the proposed system. At the end of year, an electronic income tax statement be sent to the individual taxpayer with the amount of tax calculated for payment.
Simplification of Rules, Procedures and Forms of Returns: The rules, procedures and relevant forms pertaining to income tax be got printed in Urdu and simplified so that the same could be understood easily by the business community. For this purpose, taxpayers guides may be got printed in Urdu by the FBR, FTO recommended.
The selection procedure for audit needs to be transparent. The parameters should not be secret and the chambers of commerce and industry be taken into confidence before finalizing this process, the FTO office maintained.
At the time of audit, the tax functionaries virtually called for every book, register, voucher and bank statement, etc, for scrutiny, for which neither they had the workforce nor the capacity. Since the FBR has already entire information/data in its systems, therefore it should use the said data during audit and communicate in writing, the discrepancies which need further clarification, the FTO office recommended.