Enforcement Plan 2011-12: FBR spells out strategy to reduce tax gap

The existing huge tax gap in the country could be narrowed down by taking enforcement action against unregistered non-filers, registered non-filers, registered stop-filers, registered short-filers and registered persons involved in non-payment/short payment of taxes.
Sources told Business Recorder here on Thursday that the FBR Enforcement Plan (2011-12) has spelled out a national strategy and operational plan to reduce tax gap in the country. The tax gap means difference between the potential of tax in an economy and its actual collection. The Enforcement Plan (2011-12) has been issued and would be shared with the Chief Commissioners of the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to enforce filing of returns and collection of taxes as a measure to reduce tax gap.
According to the Enforcement Plan, since the launching of tax reforms process number of registered persons and the quantum of revenue have increased, yet the level of voluntary compliance is still below the acceptable or expected level. In other words there still exists a big tax gap. The concept of tax gap is a measure to determine the extent to which taxpayers do not file their complete tax returns and pay due taxes on time. The gap can be divided into following five components: Un-registered Non-filers; registered non-filers; registered stop-filers; registered short-filers (including late-filers) and non-payment/short payment of taxes.
The Enforcement Plan (2011-2012) has further pointed out that the tax gap of both existing and non-existing taxable entities is also a measure to gauge the departmental effectiveness in its enforcement activities for filing complete tax returns by existing taxpayers, registering non-existing taxable entities and enforcing them to file tax returns and payment of due tax in time. It is, therefore, essential to quantify and evaluate the performance of Enforcement Divisions in the 3 Large Taxpayers Units and 18 Regional Tax Offices.
The Enforcement Plan (2011-12) further stated that the enforcement activities need to be geared up to reduce the Tax Gap by enforcing compliance vis-a-vis registration, filing, payment and taxpayer's account. The objective of the enforcement plan is to enhance effectiveness of Enforcement by devising comprehensive enforcement procedures to ensure compliance in a systematic manner.
One of the key features of the Enforcement Plan (2011-12) is to enforce filing of income tax, sales tax and federal excise returns by un-registered non-filers, registered non-filers, registered stop-filers and registered short/late/null-filers. The enforcement plan has also set priorities to identify sectors having revenue potential and to broaden the tax base. Moreover it has defined enforcement procedures. The enforcement plan has set performance standards for Enforcement Divisions in Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) and devised Performance Reporting System and analysis thereof, Enforcement Plan (2011-12) added.