Non-reporting, under-reporting by taxpayers: Punjab govt devising strategy

LAHORE: To improve revenue collection from excise duty, the Punjab government was devising a strategy to minimise non-reporting and under-reporting by existing taxpayers.

This was a part of the Revenue Mobilisation Strategy and Plan for Fiscal Years 2023/24-2025/26, formulated by the Punjab Finance Department.

The primary objective of the Revenue Mobilisation Strategy is to achieve high growth in the Own-Source-Tax-Revenue (OSTR) of Punjab and a higher OSTR-to-GDP Ratio thereby increasing the fiscal space to provide additional and better quality services to citizens along with ensuring necessary infrastructure investments to support economic growth of the province.

As per the document available to the Business Recorder, the primary objective of excise duty was to discourage the production or consumption of certain goods or services whereas revenue collection was only a secondary objective.

This duty was typically levied as a deterrent on non-essential or luxury items or harmful items which cause: health risks posed by, for example, tobacco and alcohol and thus making it a sumptuary tax; environmental hazards posed by, for example, fossil fuels and thus acting as a green tax; and social damage caused by, for example, gambling and thus making it a type of vice tax or sin tax.

It observed that the tax base and revenue potential of excise duty in Punjab were quite limited as most excise-eligible activities were either already under the ambit of federal excise or were illegal.

Considering the limited scope of this tax as a revenue source, the government’s strategy would be to minimise non-reporting and under-reporting by existing taxpayers through the following measures: modernization of legal framework based on international best practices; standardization, re-engineering and end-to-end automation of administrative processes; biometric verifications for licenses, passes and permits; and track and trace of manufactured items.

“The government aims to modernise the legal framework and administrative processes of excise duty. It was keen to make greater use of automation and technology in the enforcement mechanisms of the duty to lower the enforcement costs for the government and compliance costs for the taxpayers in addition to promoting the larger public policy objective of documentation of the economy,” it added.

Copyright Business Recorder, 2023