Reforming tax policy, administration a government priority

ISLAMABAD, Apr 10 (APP):The government is all set to reform both tax policy and tax administration to bring about a tax structure that would help in generating sufficient revenues to meet government’s needs and promote sustainable economic development of the country.
“The government intends to reform both tax policy and tax administration to bring about a tax structure that generates sufficient revenue to meet government’s needs, reduces the burden of high taxes that distorts economic incentives, restores fairness and equity in taxation, and promotes international competitiveness,” official sources said.
Some of these goals would require careful balancing acts as the short run losses in revenues by removing some of the distortions, including advance taxes, holding back tax refunds, lowering the burden on manufacturing sector, reducing import tariffs to make exports competitiveness, would only be offset in the medium term, an official document said.
In the interim, the immediate revenue requirements to meet primary balance target trajectory would have to be met, it said adding that accelerated efforts would have to be made in bringing those outside the tax net to expand the tax base.
The government has already created a Specialized Tax Unit for foreign assets in Federal Board of Revenue (FBR) and has taken measures to broaden the tax base while it was promoting use of information technology for data mining to detect under reporting of tax liability by taxpayers.
The government has come to understanding with different countries on sharing data on assets of Pakistani nationals in those countries, it said adding that the data from Organization for Economic Co-operation and Development (OECD) has already been received.
This measure would make it very difficult for Pakistani tax-evaders to hide their assets and bank accounts outside Pakistan, it added.
Tax policy and tax administration functions have been separated, according to the document, which added that the Ministry of Finance, which had assumed the responsibility of formulating tax policy, was in the process of strengthening its capacity to play this role.
As an important step toward this separation an Independent Tax Policy Board has already been constituted.
The tax policy would have a medium to long term horizon and would not be changed every year as it creates uncertainty for businesses.
From next fiscal year, the government would initiate a process of formulating a Medium-Term Tax Policy Framework (MTTPF), which would remove government’s reliance on ad-hoc annual tax measures thereby instilling greater certainty in the markets about tax policy direction.
According to the document, the practice of withholding payments of tax refunds had deprived exporters of funds that could have been used to expand business activity.
The government had already taken measures to expedite clearance of the present backlog of tax refund arrears through issuing of a negotiable financial instrument.
It said that the government was committed to streamline the system of tax refunds to reduce the time-lag in payment of these refunds so that there in buildup of refund arrears.
Greater use of technology will help detect fraudulent claims and speed up refunds claims for honest taxpayers, it said adding that using these techniques prompt issuing of refunds within strict timeline would be ensured.