Study being conducted on tax gap analysis: FBR replies on World Bank report

The Federal Board of Revenue (FBR) has informed the World Bank (WB) review mission that the tax authorities are planning to conduct a fresh study on the tax gap analysis in Pakistan for raising the tax-to-GDP ratio. Sources told Business Recorder here on Monday that the FBR has made these comments in the implementation report of the Tax Administration Reform Project (TARP).
The overall implementation report of the WB has mentioned 'Intermediate Outcome Indicators' to review progress of the FBR on the tax reforms. One of the indicators to review FBR's performance was the steps taken by the FBR for reduction in tax gap (annual). Responding to this, the FBR has commented that no reduction has been made in the tax gap. However, a study on tax gap is being conducted shortly, the FBR added.
According to WB report, based on the data set made available by FBR for fiscal year 2010-11, a summary assessment has been made. This summary statement gives data about the targets likely to be met, and where FBR needs to redouble its efforts if the agreed targets are to be achieved.
The WB said that the administrative cost of revenue collection (as percentage of annual tax revenues) should be maintained below one percent. FBR responded that 'yes' the administrative cost of revenue collection (as percentage of annual tax revenues) has been maintained below one percent (0.7 perccent in fiscal year 2010-11). The WB said that the FBR should conduct periodic taxpayer surveys on annual basis to check user ratings for Taxpayer Facilitation Centres. The FBR responded that it has been planned during second half of 2011-12. On the side of enforcement, the WB said that there should be reduction in tax arrears (annual). The FBR commented that during 2011-12 stock of arrears increased by 15.6 percent compared to 2010-11.
The WB further said there should be reduction in the percentage of non-filers, tax arrears, and returns with errors (biannual). The FBR responded that the income tax non-filers in 2010-11 were 47.3 percent as compared to 42.5 percent in 2009-10. The WB suggested to the FBR to strengthen FBR information systems and their management operational (by December 2011). The FBR responded as 'Yes', about $8.8 million of IT-related procurements have been completed or are nearing completion. FBR is expected to meet this goal.
Similarly, the FBR should make effective use of the IT systems by FBR field offices by December 2011. The FBR responded that there is evidence from the field that the training program is showing increased use of system modules (eg for audits). FBR's HRM wing is planning an intensive training program, including training of mid-level (BPS 7-14) staff, during second half of 2011-12. The WB said that timely project implementation, including adherence to procurement schedules. The FBR responded that 'Yes', currently on track.