The Tax Reforms Commission (TRC) has advised the government to focus more on broadening the tax net through tax compliance, enforcement and independent audits in the upcoming budget, that will help increase the tax revenue to Rs 5 trillion within the next two fiscal years.
An informed source said that the recommendations of the TRC have given extensive proposals to restructure the tax collection department, Federal Board of Revenue (FBR) to end the distrust and improving the tax compliance and enforcement in the country.
The commission has asked for strict implementation of the Key Performance Indicators (KPIs) for the assessment of the taxmen, as at present, the performance of more than 80 percent of top tax mandarins can be at best attributed as “above average”.
TRC has asked for fixing jurisdiction of LTUs and RTOs in circles for assessing their performance and with 50 percent weightage in KPIs given only to increasing the tax base in their jurisdiction. Taxmen target should be to broaden the tax base and all their performance allowances should be based upon their performance.
Instead of differentiating between the compliant and non-compliant taxpayers, FBR should be forced to include the non-complying against a certain income threshold in the next budget. Taxmen should be tasked to pursue the ‘rebels’ by assessing their income and bringing them in the tax net.
At present, 350,000 persons out of the 850,000 persons registered in the tax net don’t file tax returns even though FBR has complete data of their wealth, including businesses, bank accounts, property, and vehicles. The potential of tax collection is over Rs 5 trillion with prevalent tax measures, the commission said.
The source said that the setting up of the TRC has resulted in two benefits. Firstly, it has pressurized the FBR machinery to work. It is evident from implementing the KPIs for various cadres to assess their performance. The KPIs were drafted and implemented in days by FBR to establish that it was serious in implementing reforms.
Secondly, the questioning from TRC, forced the FBR’s Directorate of Intelligence and Investigations to investigate various cases of tax evasions by powerful sectors during the last four months. TRC has questioned the performance of directorate as it failed to come up with any substantial data about prosecution of tax evaders. This forced the directorate to raid and initiate criminal proceedings against the tax evaders.
TRC has recommended utilising the technology for tapping the tax evaders. It has recommended appointing an independent board for PRAL lead by a techie CEO for analyzing and utilizing data. The audit department should be totally independent and tax men should be properly trained to hold audits of MNCs which have implemented automated systems.
