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ISLAMABAD: The new government has to shift from a major enforcement policy of excessive tax demands, frivolous notices, and recovery proceedings to a business-friendly tax environment to increase revenue collection, encourage voluntary compliance, and expand the tax base.

Experts told Business Recorder that the tax incentives need to be given to business and trade instead of exaggerated tax demands in the field formations. The FBR’s field offices should avoid practice of the frivolous notices. Tax burden needs to be reduced.

At present, business and trade are very much upset on the frequent issuance of notices raising excessive tax demands in various cases. This has resulted in a sense of harassment in the business community.

The environment of over enforcement has created fear and harassment in the business community.

The tax incentives to the business community would not comprise revenue collection because over 52 percent of the existing tax collection comes from import stage.

The FBR cannot work in isolation and it has to take business community into confidence. The business community and the tax machinery are interconnected as far as tax payments are concerned. The one-sided actions of the FBR’s field offices only increase litigation in courts, the sources maintained.

Experts said that the FBR should focus on only actionable tax demands through notices to only potential taxpayers by avoiding excessive and multiple notices to the taxpayers. The demands which are not genuine are struck down by the courts. The courts issue stay orders in all cases where tax demands are not genuine. Therefore, the FBR’s exercise of excessive tax demands is an exercise in futility, the tax experts concluded.

When contacted, former chairman Federal Board of Revenue (FBR) Shabbar Zaidi told Business Recorder that the new government may not introduce major reforms in the personal income tax (PIT) by increasing taxation of Rs120-150 billion on salaried class.

Zaidi said that it would not be possible for the next government to substantially raise taxes on the salaried class. The personal income tax reforms are not possible because it would have serious implications over the salaried class.

He said that Pakistan is under the IMF programme. The government cannot make any major change in the existing tax policy.

The FBR would have to continue with the existing tax policy and enforcement measures in the upcoming budget (2022-23), he added.

Copyright Business Recorder, 2022

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