World Bank (WB) has expressed concern that the single returns portal has not yet become fully functional for provincial general sales tax (GST) authorities and is pending agreement on the GST harmonization agenda.
This has been stated in the Bank’s official documents on the implementation status & results of Pakistan Raises Revenue (PRR) relating to the Federal Board of Revenue (FBR), a copy of which is available.
The report revealed that the Federal Board of Revenue (FBR) had harmonized the definitions of economic activities subject to GST harmonized with all four provinces. Some progress has also been made on harmonized definitions of goods and services subject to GST by federal and provincial governments.
The Mid-Term Review (MTR) conducted from October 17 – November 11, 2022, noted satisfactory progress towards achieving project objectives and implementing the results-based component of the project.
There is encouraging progress in the implementation of Track and Trace, where monitoring of the production system has been installed in the sugar and fertilizer sectors, while installation in the cement and tobacco sectors is underway.
FBR has added 462,677 new taxpayers, identified through automated data sharing and ICT-based business Intelligence tools.
There is improved performance in several Disbursement Linked Indicators (DLIs). There is a reduction in withholding tax lines from 58 in FY19 to 31 in FY22 and the Finance Division has published the detailed tax expenditure for FY21 and evidence-based revenue forecasts for FY22.
FBR has established a Compliance unit and implemented Audit Management Information System (AMIS). In FY22, FBR completed 67 comprehensive field audits of large taxpayers for cases selected by the risk-based selection tool and monitored by the Compliance Unit through AMIS.
However, the single returns portal has not yet become functional for provincial GST authorities and is pending agreement on the GST harmonization agenda.
There is improved performance on customs processing with the reduction in the frequency of physical inspections at the border – from a baseline of 60 percent of goods declared through the red and yellow channels in FY19 to about 34 percent in FY22.
Simplification of FBR’s core business processes is proceeding and, to date, FBR has completed the review, redesign, or simplification and automation of 12 out of 16 business processes – i.e. 36 out of 48 steps (DLI 9). Finally, the FBR has continued to track the Key Performance Indicators (KPIs) and published the bi-annual and annual results report on its website.
Following the MTR, a restructuring of outcome and intermediate indicators is proposed in early 2023 to support improvements in project performance.
Customs Act has been updated in line with the latest requirements of Kyoto Convention Article 3.25 “National Legislation shall make provision for the lodging and registering or checking of the goods declaration and supporting documents prior to the arrival of goods”. Custom law is also aligned with Kyoto and TIR conventions.
Pre-arrival/pre-clearance system was introduced in FY21 (which has allowed for conformity with Article No 7 of the Trade Facilitation Agreement). e-TIR module is in the process of development in coordination with the United Nations Economic Commission for Europe. Development of a single IRS Code (by merging administrative provisions of all taxes administered by the IRS, i.e. Income Tax, Sales Tax, Federal Excise Tax, and Capital Value Tax) is in process.
