Officials in the financial capital of Pakistan, Karachi, stated yesterday that the Federal Board of Revenue (FBR) is planning on introducing a new system of sales tax on services collection with the help of a common returns filing and tax payment system. This system would come directly under the control of the head of sales tax on services.
However, the officials also added that provincial authorities are unwilling to adopt this system or even merge with the federal one. This is obviously the leading cause of delays in the implementation of the plan.
Issues Hampering the Adoption of Common Tax Collection System
The two provinces of Sindh and Punjab are prepared for this system but recently-developed KP’s revenue board is still in the process of developing their system while Balochistan is even worse off with the revenue authority in its very initial stages. The willingness and ability of all provincial authorities to develop this system is needed to be able to have a common platform, which will be very difficult otherwise.
Right now, the taxpayers as few as they are, have to deal with a lot of hassle when paying their taxes – dealing with five revenue boards actually! First the four provincial boards and then the federal board all have to be dealt with in order to pay off their monthly taxes and for monthly filing of sales tax returns.
A Common Tax Collection System Can Make Life Simpler
Our taxpayer base is already narrow and with all this hassle more people do not want to go through all this. One official said that when and if the provinces were ready to convert to the new system, it would reduce the time taken to pay the taxes by significant amount with taxpayers only selecting one option for payment and filing of returns on one form.
The 18th Amendment to the Constitution about seven years ago entrusted the responsibility of sales tax collection to the provinces. With Karachi being the country’s financial capital it was most important that province has an up and running revenue board soon and that is exactly what the provincial authorities did – Sindh Revenue Board was the first to be developed, then Punjab, KP, and lastly Balochistan.
However, this clause in the 18th Amendment didn’t always prove to be beneficial. There were those taxpayers who worked inter-province and now had to deal with more than one jurisdiction rather than just the FBR, and thus the task of filing tax returns became an arduous process that they would rather not think about at all. The new system will once more give all the authority to the federal board and that’s what worries the provincial authorities most.
Officials Respond
The official from the FBR went on to suggest that for this purpose there should be two separate bodies working together.
The officials of the Sindh Revenue Board also went on to say that it is the federal authorities who are showing increasingly less interest in merging the sales tax on services which would help taxpayers. An official from the SRB also stated that the board had suggested to the Pakistan Revenue Automation (Pvt) Limited (PRAL) that they develop a single reporting system for taxpayers to operate simultaneously under the authority of the FBR and SRB but they have still not received a response from them as yet.
Blame games, overlapping jurisdictions, conflicting laws and interests. The tax system issues cannot be solved by those who are part of the problem – FBR, SRB and PRA. These are bureaucrats entrusted with short-term tax collection targets. So, they make decision each year that further drives people away from the tax culture. The problems need to be discussed and addressed at Federal and provincial government levels, not at revenue authorities level. For starters, revenue authorities should have no power to dictate tax policies. KPK Government has done well (in theory atleast) by making a Policy Council over the KPK Revenue Authority.