Sources said that the WB submitted a report, consisting of six pages, which critiqued the draft RGST bill and presented reservations and recommendations to address the issues. The bill is incomplete as of now.
According to sources within the ministry of finance, the IMF has mandated the WB to address the implementation of RGST in the country. The WB is amongst the donor bodies under the umbrella of the IMF. The report was prepared by two WB professors.
The main aim of implementing a broad-based consumption tax has been lost in the RGST draft, which focuses on a hybrid system that brings only a few services into the tax net under the Federal Board of Revenue (FBR), according to the report.
There will be two groups of services under the FBR. Revenue from taxation on the so-called “group two” will be divided amongst provinces on the basis of origin of service and revenue from taxation on “group three” will be divided amongst the provinces along the lines of a pre-determined formula. Another group called “group one” will include services to be taxed by provinces alone.
The WB pointed out that there is no indication of an agreement between the federation and provinces on whether all the services will be taxed uniformly across provinces or not. According to the WB, taxation on telecommunication services can be implemented most favourably by a telecommunications tax law.
The WB document further pointed out that there is no mention of how services supplied to the government will be taxed which implicitly means that services provided by and supplied to the government will be subject to the same tax.
Published in The Express Tribune, October 31st, 2010.
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