Administration’s intervention hampers tax collection at full potential


An official source said on Sunday that the intervention of tax administration in the presence of complex compliance procedures is hampering the exploitation of full tax potential.
The official said that the Framework for Economic Growth (FEG) had described narrow tax base and high enforcement costs as the major problems in resource mobilization.
The reform process which was initiated under Tax Administration Reform Project (TARP) has yet to materialize into a higher tax-to-GDP ratio.
This reform includes the raising of tax revenue through improved compliance with tax laws and broadening of the tax base. Improving effectiveness, responsiveness and efficiency of tax administration through institutional and procedural reforms is also a part of the overall agenda, while improving collection through transparent and high quality tax services and strengthening audit and enforcement procedures is also important in this regard.
However, the official said that even after several years of the reform effort, the tax policy remained complex, and favored an elected few while corruption and poor administration had weakened collection and allowed vested interests to prevail.
He added that tax administration reforms should be based on amending the Income Tax Ordinance 2001 and Sales Tax Act 1990 so to limit the discretionary power of the Federal Board of Revenue (FBR) and to improve the administration, the auditing system and the tax refunds system.
The official stressed the need to simplify the tax system and tax administration by creating one-window cells for tax registrations at the sub-national level to federal, provincial and local government. He added that reforming data warehouse in FBR with assistance from NADRA would help them to check multiple bank accounts of tax payers.