The third meeting of Tax Reforms Commission (TRC) will be held on January 17, 2015 (Saturday) at Large Taxpayers Unit (LTU), Lahore to discuss changes in tax policy regarding sales tax, income tax and customs duty. The Federal Board of Revenue (FBR) has asked Chairman TRC Masood Naqvi along with its members to attend the meeting on January 17 at Lahore. In this regard, LTU Lahore is making necessary arrangements for the TRC meeting.
The National Tax Reforms Commission would chalk out draft practical recommendations for the government to gradually withdraw the presumptive tax regime, improve enforcement of the existing tax system, remove flaws in the Universal Self-Assessment Scheme (USAS) and exploit full potential of value-added tax (VAT) regime.
The committee would submit its practical recommendations to the government before announcement of federal budget (2015-16). Each recommendation would be backed by rationale and complete implications supported by comprehensive data.
The commission is examining different options and international VAT models for recommending changes in the existing sales tax regime. India has entirely different model of VAT. One of the possibilities is to collect sales tax through federal and provincial governments at one stage to improve revenue collection. One of the proposals under consideration is to introduce single stage sales tax replacing the existing standard rate of 17 percent sales tax. Another option is to start the single stage sales tax on certain items for progressive implementation of VAT. The commission is examining the pros and cons of the proposal for implementing single stage sales tax and its impact on the documentation of the economy for making further improvement in the tax regime.
One of the major reasons hampering growth in the sales tax collection is distortion in the system, he explained. At present the supply chain has been broken under the VAT regime, IT support to the system is not available and there are issues of frauds/inadmissible input tax adjustment, flying invoices, excessive refunds, refund accumulation and related corruption that needs to be addressed through dynamic reforms. About the income tax reforms, he said that after implementation of the functional-based system through self-assessment scheme, it was designed to reduce corruption and minimise interaction between the tax official and taxpayer. The rationale behind implementation of the USAS was logical. In the initial years, the USAS performed well. However, the functional-based system was not much successful in the absence of sound IT system and audit. It is a general feeling in the tax department that the existing USAS on functional basis is not delivering well. It is perception of the tax department that the revenue is going down over a period of time and efficiency and accountability in the system is not visible. It would be examined whether hybrid type system would be acceptable replacing the USAS. On the income tax side, final tax regime need to be gradually phased out over a period of time, sources maintained.
In order to move forward he has constituted Committees for a focused discussion on various components of TOR and asked Members to indicate the Chairman about their interest in serving in any of the following Committees: Tax Policy; Direct Taxation; Indirect Taxation; Sales Tax and Excise Duty; Customs; Administrative Reforms and any other Committee. Now, all committees have become fully functional and perform their duties as per specified TORs. The committee would also ensure increase in visibility of the commission among the business/trade, they added.
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