Smuggling-prone items' tariff to be rationalised in three months: Salman

Federal Board of Revenue (FBR) Chairman Salman Siddique has said there is a tax gap of 79 percent, out of which 74 percent only relates to income tax. Thus, Pakistan cannot sustain in presence of this huge tax evasion. He was speaking at the Lahore Chamber of Commerce and Industry (LCCI) here on Saturday. Regarding sending notices to existing taxpayers, he said that there is no is 'holy cow', as everyone at any stage is evading taxes.
The FBR has identified 120,000 new assessees using Nadra database and 19 other filters who have been served with notices. As a result, out of them, 22,000 have not only filed income tax returns but also paid taxes, he added. "We believe in collection of revenue rather than prosecution and humiliation of businessmen" he said, adding that import data are cross-matched at Pakistan and Afghan border under the treaty of 2010 while tracker system will also help curb smuggling.
About misuse of Afghan Transit Trade for smuggling, the FBR Chairman said that during last two and a half years, 350,000 cargo containers entered Pakistan. Out of this, 29,000 could not reach destination--Afghanistan--whose cases have been forwarded for adjudication. He said that Pakistan received Rs 6.7 billion on account of duty on Afghan Transit Trade. He added that the level and a system in this regard would be in place after three months.
The FBR Chairman said the provinces need more revenue to meet social sectors like education, health, sewerage and water supply requirements, as following 18th Amendment, most the departments have come under their jurisdiction. Salman assured the business community that all major issues were going to be resolved with due consultation of business community and it would be taken on board like SRO 821, under invoicing and sales tax problems.
Regarding use of revenue, the Chairman said that revenue shortfall compelled the country to go for IMF program, as out of total Rs 1,558 billion revenue collected by the FBR, Rs 750 billion would go for debt servicing and Rs 441 billion to defence spending, while one percent is retained by the FBR on account of tax collection. In addition, after the passage of National Finance Commission award, 60 percent revenue directly goes to provinces. That leaes the government with no other option except borrowing, he said.
Pakistan needs to have Rs 550-600 billion addition amount to get rid of deficit that was why Pakistan had to go to IMF for financing to avert chance of default in balance of payments. There is no country in the world which has been dictated by the IMF and the World Bank except Pakistan. "We have to find out indigenous system to get out of the crisis and don't need international expert for this purpose. Any economist can resolve this issue within five minutes by suggesting to bring agriculture, services and some other sectors in the tax net."
Salman said that all policies were made in better interest of stakeholders, but after implementation some anomalies had been witnessed and the Board was trying to remove them. He indicated that after restructuring the FBR, all regional chiefs were now competent enough to resolve day to day issues on their own. They have been directed to constitute committees in collaboration with chambers, trade bodies and other stakeholders to sort out pressing issue on priority. He also asked the LCCI to forward its nominations for these committees. He further stated that the only objective to formulate such committees was to work out a methodology to tackle individual issue.
He said that the FBR was also formulating its core policy that would be finalised by the end of next month. He said that it was the second meeting after a meeting with Rawalpindi Chamber of Commerce and Industry and these meetings are being conducted to institutionalise contacts with stakeholders. He said that it was a routine practice that FBR started receiving budget proposals in March. However, this year the FBR had initiated this process by these meeting and it would be completed by March.
LCCI President Irfan Qaiser said that the PRAL system of e-filing needs urgent improvement to make it user-friendly. In case where tax payers have not been able to complete online returns as a result of this problem, no penalty should be imposed on account of non-filing of ST return for the period of August and September. "We demand that tax return forms should be simplified, as promised by FBR on many occasions."
He said The Rule 5 sub-rule (4) of Sales Tax Rules, 2006 for import of machinery by new manufacturers is being misinterpreted by FBR officials. A clear and unambiguous procedure should be laid down to tackle this situation. "We believe that under SRO 283 of 2011 input tax should be allowed, in case of taxable supplies at the rate of 4 percent and 6 percent, as this denial amounts to double taxation," he added.
With regard to the turnover tax, its increase to 1 percent from 0.5 percent for all sectors has created an unnecessary irritant. Therefore, it needs to be reversed to previous rate of 0.5 percent. "We also suggest that imports through TT should be strongly discouraged in order to promote documentation of the economy." The country is experiencing an unprecedented de-industrialisation because valuable industrial raw materials are being exported. The pet bottle scrap which is a raw material for regenerated polyester fibre is being exported to China and at the same time 50 percent duties and taxes are imposed on it at the import stage. This needs to be rationalised to save the local industry.
Irfan said that Pakistani exporters and importers face many difficulties at the Wagha border, as over and above customs there are other departments like NLC and Rangers involved. Therefore, a uniform SOP with the consultation of all concerned departments be made to ensure smooth business with India. He said that computerised system of Care/PaCCS is only installed at Karachi while other system is used at all other ports of the country. Similarly, valuation formulas at Karachi port vary as compared to those for rest of the country. It is demanded that such anomalies be removed.