| Finance Minister vows to approach
non-taxpayers in next few weeks without prior notice | Says government already possessing data of millions of taxpayers
ISLAMABAD – Federal Minister for Finance and Revenue Shaukat Tarin on Friday warned that Federal Board of Revenue (FBR) would approach the non-taxpayers in next few weeks without prior notice.
“We will facilitate taxpayers; however, everybody has to pay taxes,” Shaukat Tarin said while addressing the launching of FBR’s National Sales Tax Return. He warned that FBR would approach non taxpayers without prior notice in the next few weeks. However, he clarified that taxpayers will not be harassed under any circumstances. “I assure the nation that change is taking place, we are making use of technology and will reach all potential taxpayers.”
He said that with the help of technology, the government would reach to all those persons who have taxable assets but were not paying taxes. He further said that there was now no need to issue notices as the government was already possessing data of millions of taxpayers. He was of the view that people live in bog houses, travel in luxurious cars, and dine in at expensive restaurants, but when it comes to paying taxes, people pay a very little amount.
He said that the FBR would reach the tax-avoiders and provide them the tax returns with an opportunity to prove it wrong by consulting panel of auditors or pay the due taxes. “We will not harass, we will tell them what they possess. If they don’t pay, then the law would take its own course,” he added.
Finance minister congratulated federal and provincial revenue divisions for coming on a single platform and making payment of revenues easy for taxpayers. Since sales tax on goods was federal domain and sales tax on services was coming under provinces, hence it was creating hardships for taxpayers.
Now, under the single platform, the taxpayers would be facilitated, adding that in previous system, if a company was operating in all the provinces, it had to deal with around seven agencies for filing returns, with chances of errors. However, now they would be required to file single tax under the new system.
He said that the government was also working on further harmonization of system to facilitate taxpayers and expressed the hope that ease in tax deposit system would help enhance revenues.
The minister said that there was no other way, if the country had to progress and prosper, there is need to enhance revenue collection. He cited example of Germany where he said there was no representation without taxation. He lamented that there were only 3 million taxpayers out of 220 million population in the country. He said, out of around Rs18 trillion retail sales, only Rs3 to Rs4 trillion were captured and Rs14 million sales are still missing from the tax system.
He explained that due to fragmentation in Sales Tax payment, taxpayers were required to file separate Sales Tax returns every month to each of the different Sales Tax collecting authorities. “For example, a telecommunication service provider operating throughout Pakistan has to file returns every month to FBR, Sindh Revenue Board, Punjab Revenue Authority, Khyber Pakhtunkhwa Revenue Authority, Baluchistan Revenue Authority, AJK Council Board of Revenue and Gilgit-Baltistan Revenue Authority,” he continued. He termed it a very tedious and cumbersome task, which often led to errors and disputes. He further added that the reforms of Sales Tax regime earlier introduced in the Supplementary Finance Bill-2021 and the new data repository developed by FBR in collaboration with NADRA were a big leap forward towards documentation of economy and completion of VAT chain which remained severed due to distortions. He emphasized that the NSTR will be another pillar in the achievement of this objective and FBR will now be able to assess the indicative income of non-filers with sufficient accuracy and through use of technology.
Therefore, the National Sales Tax Return was developed after discussions and agreements signed with the provincial revenue authorities, hence, acceptable to them as well. The feedback from other stakeholders, including taxpayers and tax practitioners, is also very positive. It will save time and effort, and reduce compliance costs. Furthermore, this was also a key recommendation of international agencies such as World Bank.
One of the greatest benefits of this system is that it encourages harmonization of tax procedures, definitions and principles between the federal government and the provinces, which will promote national unity and cohesion.
Earlier, Chairman FBR/Secretary Revenue Division welcomed the finance minister on this auspicious occasion. He explained the scope and significance of Sales Tax regime and highlighted the salient features of “National Sales Tax Return”. He added that presently sales tax in Pakistan was fragmented among seven different revenue collecting authorities. Sales Tax on goods throughout Pakistan is collected by FBR for the federal government whereas Sales Tax on services was collected by the respective provincial revenue authorities. While this arrangement is according to the Constitution of Pakistan, 1973, it creates many practical challenges for the taxpayers as well as the tax collectors, he explained.
Further elaborating the salient features of NSTR, he stated that the system will act as a single repository for all domestic transactions and invoice management. It will automatically apportion input tax, prepare the return, and work out tax payable to each of the relevant authorities. The new system is based on the IRIS platform, which already has many built-in functionalities. The new system has linkages with POS transactions as well as Track & Trace which will contribute significantly not only to broadening the tax base but also in ensuring the ease of doing business.
He continued that FBR was moving fast towards developing a similar National Income Tax Return in order to facilitate taxpayers and, simultaneously, maximize tax compliance. He concluded by reiterating that these innovative and out-of-box digital interventions were primarily meant to enhance tax-to-GDP ratio to 15% over the short term.