ISLAMABAD: Previous reforms in the tax administration failed to address structural issues of the taxation system, sources quoted Chairman of the Federal Board of Revenue (FBR) Ali Arshad Hakeem as saying on Saturday.
Sources told Business Recorder here on Saturday that he made these remarks during the last visit of the Prime Minister to the FBR House.
According to sources, the FBR Chairman said that ‘black economy’ was a reality which needed to be recognised and converted into an opportunity.
The FBR Chairman, in his presentation, gave an overview of the organisational structure and its spread across the country. He also presented an overview of the taxation structure, comprising direct and indirect taxes and customs tariff.
According to the FBR Chairman, while there had been growth in tax collection, tax-to-GDP ratio was very low by comparison with other countries.
The chairman was reported as saying that the real issue was that the tax base was very narrow: only 0.9% of the country’s total population paid taxes.
Similarly, he said, tax compliance was also very poor because of a number of reasons. Reforms that were launched in the past actually failed to address structural issues of the taxation system, he is reported to have told the prime minister.
Highlighting multiple challenges faced by the FBR, the FBR Chairman said that they included a narrow tax base, weak technology infrastructure, non-documentation of the national economy, workforce training, integrity and morale, weak audit enforcement, concessionary tax regime and weak border controls.
According to him, the country’s economy operated in a culture of SROs. Black economy was a reality that needed to be recognised and converted into an opportunity. Similarly, there was no unified taxation system despite significant investment in technology.
The FBR Chairman expressed the confidence that structural imbalances within the taxation system could be successfully transformed into opportunities for expanding the tax base, improvement of the tax-to-GDP ratio and collection of more revenues for socio-economic development of the country.
Outlining his future strategy to address the challenges, he ssaid that in the short-run, the strategy would be the unification of database, corporate sector reforms, tariff reforms, lowering effective tax rate and effective enforcement of border controls to prevent smuggling. He also proposed launching new initiatives, besides calling for the establishment of border surveillance infrastructure and the creation of a 10,000-strong Border Force for effectively curbing cross-border smuggling.