Umar says govt is ready to amend laws for implementing TRC proposals.
PHOTO: FILE
While chairing a meeting, Finance Minister Asad Umar assured the participants that the government was ready to amend laws and bring administrative changes to implement the TRC’s recommendations. He also hinted at bringing legal and administrative changes to curb under-declaration of real estate values. The meeting was attended by tax and legal experts from the private sector, including members of the Tax Reforms Implementation Committee (TRIC).
The TRC also proposed the setting up of a national tax agency, besides stripping the Federal Board of Revenue (FBR) of its policymaking role, which is in line with the PTI’s election manifesto.
The finance minister promised to get the Benami rules cleared from the relevant cabinet body. The Benami Act that empowers the FBR to take over properties held in names of people other than real owners remains ineffective in the absence of rules. There have been lobbies in the bureaucracy that blocked implementation of the Benami law despite its approval by the last National Assembly.
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Wednesday’s deliberations suggested that the finance minister was keen to take forward the unfinished tax reforms agenda. The government faces twin tax challenges - the extremely narrow tax base and low tax-to-GDP ratio.
Umar also decided to revive the TRIC, retaining its old composition. Three members of the TRC - Abid Shahban, Karachi-based eminent lawyer, Ashfaq Tola, a leading tax expert and Masoud Naqvi, a chartered accountant - have been retained as TRIC members. TRIC meetings would be chaired by Minister of State for Revenue Hammad Azhar.
The last PML-N government set up the commission that gave its report over one and a half year ago. But the previous political setup never showed its intention to implement these reforms. The FBR’s bureaucracy also created hurdles in the way of tax reforms.
The TRC meeting was held on a day when the UK renewed its support to strengthen Pakistan’s tax system. The FBR and the UK’s revenue authority, Her Majesty’s Revenue and Customs (HMRC), on Wednesday signed a memorandum of understanding (MoU) for cooperation in tax matters.
The UK is helping Pakistan improve its tax systems and is also cooperating in handling taxpayers’ information received from foreign jurisdictions under the OECD treaty.
Umar gave a challenging task to the TRIC, asking it to start enforcing short-term recommendations within one month as against the TRC’s six-month plan. The finance minister also asked the reforms body to advance the implementation schedule of medium-term recommendations. The TRC had recommended the introduction of administrative reforms in the short term and implementation of structural reforms in the long run. The minister also directed the FBR bureaucracy to translate all tax laws into Urdu language within three months.
The findings of the commission highlight serious flaws in the tax structure that is burdening the poor and giving huge relief to the elite. The report stated that Pakistan could not improve tax collection at the national and provincial levels unless fundamental administrative reforms were introduced.
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Umar also asked for simplifying income tax return forms aimed at encouraging people to come under the tax net.
The finance minister hinted at bringing changes to improve the government’s tax collection from the real estate sector. The meeting discussed the proposal of setting up an office of the evaluator.
The TRC recommended that the federal government in coordination with provincial governments should design the valuation mechanism for immoveable properties in various categories.
The value needs to be revised every year through independent evaluators, according to the TRC report. The value so determined should be minimum 75% of the current market value.
Immoveable property is a sector where a significant amount of untaxed money is parked, especially due to the difference in fair market value and the collector rate fixed for properties.
Published in The Express Tribune, October 18th, 2018.
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