Prime Minister Imran Khan has directed Federal Board of Revenue (FBR) to bring transparency and improve tax compliance in the country through reforms, besides bringing political interference in the tax machinery to an end. Prime Minister Khan issued these directions while chairing a meeting on FBR reforms here at the PM Chamber in the Parliament House on Thursday.
Sources said that FBR team headed by its Chairman Mohammad Jehanzeb Khan and comprising Members Inland Revenue Policy, Operations and Customs briefed the PM. One of the major reform initiatives approved by the federal cabinet on Thursday is to separate revenue collection administration from tax policy formation with the objectives of enhancing revenue collection and promoting equity and transparency in the tax machinery.
The decision was taken following a special briefing to the cabinet meeting on Thursday headed by Prime Minister Imran Khan. Following this major change in FBR, the policy formation power will be taken away from FBR and handled separately. The FBR''s role will be confined only to tax administration and tax collection under the envisaged reform plan.
Under section 6 (Establishment of Policy Board) of the Federal Board of Revenue Act 2007, the Federal Government may establish a Policy Board to provide guidance in matters relating to the vision, mission, and values of the Board, and to provide policy guidelines in framing fiscal policy and in achieving goals and targets. The Policy board shall consist of Members including Minister for Finance, Chairman; Minister for Commerce, Member; Minister for Industries, Member; Minister for Textile Industries, Member; Minister for privatization would be Member and other members as specified in the FBR Act.
The FBR informed Prime Minister Imran Khan that the roadmap for reforms in tax administration and revenue collection covers policy and enforcement measures including establishment of national databank, action against tax evaders, high-net worth individuals, and expansion in the tax-base and tax-to-GDP ratio. FBR chief Jehanzeb Khan briefed the Prime Minister about administrative and enforcement measures to generate Rs 92 billion in 2018-19 using technology.
He said that several initiatives were taken in the last couple of months to increase revenue and make tax system more transparent. Under the short-term plan, the first priority in the reforms measures is to identify potential taxpayers who do not exist on the tax roll of the country. In this regard, FBR has sent notices to over 3,000 high net worth individuals during the last two months under the drive of broadening the tax base.
The PM was informed that over 3,000 notices were sent electronically to big non-filers. The FBR is waiting for the response from these people and then it will be in a position to determine how many of them have not declared their assets/income.
The FBR informed the PM about the progress on cases identified as high net worth evaders who did not file tax returns. This exercise will be vigorously extended on continuous basis to identify major non-filers drawing huge amounts of income/holding high value assets.
The FBR team informed the PM on action started against all those tax evaders who have purchased properties over Rs 20 million, or purchased 1800cc or larger engine cars, or received rent to the tune of Rs 10 million or more in a year but not bothered to file their tax returns; therefore not in the list of taxpayers. The drive for the recovery of tax from these big tax evaders has already been launched across Pakistan without any discrimination.
Moreover, the FBR has also approached various public sector entities equipped with databases to identify potential taxpayers, especially the data related to motor vehicles and land registration authorities.
He briefed the PM that FBR has taken several steps particularly introduction of currency declaration system at major entry and exit points to stop the currency smuggling from the country.
The PM was informed that the recent MoU signed with the Chinese authorities during the visit of Prime Minister Imran Khan to China will help control undervaluation of goods at Pakistani ports.
The FBR has also established integrity management unit for internal control, which resulted in transferring and postings of tax officers on merit and competence.
The presentation to the PM also covered areas of policy, enforcement and revenue collection position and measures to increase collection. The briefing covered impact of revenue and administrative measures for generating additional revenue during the current fiscal year.
The FBR informed the PM on effective utilisation of data of all public sector organisations to broaden the tax net through data integration which can help identify tax evaders. The FBR also shared blueprint of its development needs for the next three years and a prospective plan on the IT and communication side for the next 10 years under a systematic plan with a clear roadmap.
The FBR is facing a shortfall of Rs 60 billion during the first four months (July-October 2018-19), as provisional collection during July-October current fiscal year stood at Rs 1,106 billion against target of Rs 1,166 billion.
The FBR is facing an uphill task to meet the ambitious revenue collection target of Rs 1,115 billion in the second quarter (October-December) of 2018-19.
The FBR has suffered shortfall of Rs 15 billion during the first quarter (July-September) of 2018-19. The tax projections of Rs 1,100 billion for the second quarter plus shortfall of Rs 15 billion in the first quarter of 2018-19 would require FBR to collect Rs 1,115 billion during the second quarter (October-December) of 2018-19.
The FBR has estimated to collect Rs 71 billion from four areas i.e. recovery from audit, high net worth individuals, liquidation of litigation cases and revenue from tobacco sector during the year 2018-19.
Sources said that the FBR has estimated tax demand from audit/high net worth individuals to the tune of Rs 37 billion, expected revenue generation from liquidation of litigation cases would generate Rs 20 billion and estimated revenue from tobacco sector stands at Rs 14 billion. The accumulative effect of the said measures comes to Rs 71 billion.
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