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ITIS solely for tax base broadening

ISLAMABAD (December 18 2003): The indigenously developed 'Integrated Tax Information System' (ITIS) would solely be used for broadening the tax base by discovering new taxpayers, eliminating chances of any harassment to the general public.

This was stated by Central Board of Revenue (CBR) top tax manager Vakil Ahmed Khan while briefing newsmen on the ITIS system here on Wednesday.

A comprehensive presentation and practical demonstration of ITIS was also given by Chief Co-ordinator, ITIS Qudrat Ullah.

Vakil said that the basic reason for devising such computerised system was to identify and bring more people into the tax net.

It has been estimated that the number of NTN holders would go up from existing 1.7 million to 3 million. The whole exercise is expected to be completed in the next four years with the support of chambers of commerce and trade associations.

The CBR intends to issue NTN to 0.3 million persons during current year.

Vakil said that all economic surveys were unanimous on one thing ie tax base should be broadened, and ITIS would exactly do the same trick. But CBR wants to motivate people for voluntary compliance instead of forcibly bringing some one into tax net as current year has been declared as 'Year of Broadening of Tax Base'.

There is a possibility that persons identified through ITIS are already paying withholding tax (adjustable tax) through phones/mobile phones and commercial electricity bills.

He said that the people who are obliged to file income tax returns include owners of houses with 250 square yards or more, flats having 1500 square feet covered area, a person owning a motor vehicle and persons having telephone connections etc.

Vakil said that the tracing system would help in identifying these persons.

However, the CBR has no intention to target any person or cause harassment to people. Only in exceptional cases, the CBR would ask for source of income.

Presently, the system is operating at Lahore, which would be soon replicated in all other major cities like Islamabad and Peshawar within the coming three to four weeks.

Vakil said that CBR would use data collected through both internal and external sources including National Tax Numbers (NTN), motor registration authority, tax return data, utility agencies, tax payment receipts, PTCL/mobile phone data and survey data.

At the same time, CBR has taken all necessary precautions that the data could not be used for blackmailing any person as only Inspecting Additional Commissioners (IACs) would have access to the information for specific use. Once the person has got NTN, CBR would not further utilise information available with the ITIS regarding any taxpayer.

The system would not be utilised for increasing tax collection, but it would only be used for broadening of tax base. The tax would automatically come as a consequence of expanded tax base.

As part of ongoing restructuring of tax machinery, the Number one priority of CBR is broadening of tax base.

The CBR will not ask for previous information about the taxpayers and they would only have to file return for current year.

Those who are NTN holders but not filing returns would have to file income tax returns. This includes particularly salaried class.

The salaried class should submit the employer's certificate and file tax return in case of additional income to fulfil legal obligation.

Similarly, people having income below taxable limit would also have to file their income tax return.

Tracking system will not be used for penalising people, while an environment would be created to encourage voluntary compliance.

Member direct taxes said that CBR would issue polite informal letters to prospective taxpayers to get their NTN. However, CBR will not issue statutory notices to them. If the person has NTN, then he could simply write to department that he already possesses NTN. Otherwise, the CBR would dispatch the NTN form to the person for getting a new tax number.

In this connection, the CBR has already started writing informal letters to the persons identified through ITIS in Lahore and Karachi.

In case a person is not responding to informal letter, then the CBR would be in a position to serve statutory notice to that person.

Responding to a query, Vakil clarified that the exercise would not be instrumental in direct interaction between tax officials and taxpayers.

People do not have to come personally to meet the tax officials to respond to informal letter sent to them. They would simply dispatch their reply.

Under ITIS, the CBR has enough data. The additional data would be taken into account only after utilisation of existing data.

The CBR is stressing on utilisation of data instead of collecting more and more information.

Giving an example of ITIS system, Vakil said suppose a person declares that he is living in a house on rent, but data shows that he is actually a house owner.

In such false declarations, the CBR has the authority to question the person.

Vakil pointed out that ITIS would not categorise people. Any person whether he is a parliamentarian, doctor, engineer or belongs to any other profession, will be dealt equally under the tracking system.

The crux is that anyone who is obliged to file return should have to file tax return, Member DT added.

Vakil said that Federation of Chambers of Commerce and Industry (FPCCI) and chambers have fully supported the idea of broadening tax base. The CBR is trying its level best to broaden tax base with the help of representative associations of business community.

After processing of returns, the CBR will discover taxpayers who have filed returns last year, but not filed returns this year and secondly, those persons who are bound to file returns, but have not filed their returns.

When asked that the ITIS system has the ability to check under-reporting of taxpayers, Vakil clarified that CBR would not go for small cases of under-reporting. Only gross cases of under-reporting would be targeted.

Member Direct Taxes added that CBR has also given presentation on the tracking system to IMF, Governor State Bank and Chairman Securities and Exchange Commission of Pakistan (SECP).

In his presentation on ITIS, Qudrat Ullah said that the government faces many difficulties in broadening the tax base. These include culture and ground realties, large informal sector, lack of documentation, cash transactions, non-compliance attitude of people, absence of tax culture, political will, illiteracy and lack of awareness, cumbersome tax procedure, lack of access to potential taxpayers especially in remote areas.

On the ITIS, Qudrat Ullah said that in the past CBR had scattered data which has been organised using search engines.

The data sources for ITIS included NTN, tax return data for the last three years, tax payment/receipt data for the last ten years, survey data, motor vehicles data, utility agencies data and PTCL/Mobile phones data.

The system has the ability to identify non-filers and under-reporting and contain over 15 million entries or data separately maintained.

This system would also help tax officials in future forecasting of growth in tax revenue, provide information and assist tax administration.

The ITIS system when used for tax audit would help in data matching, identification of misreporting, verification of tax receipts and prompt processing of refunds.

The CBR has taken several measures to ensure security of the system. These encompass users' authentication, maintenance of extracted information and administration of security through regional offices.

The ITIS program has also data on the import/exports and withholding tax regarding businessmen in Lahore.

If anyone wants access to the information, he requires certain code to log in the system. Once the information is retrieved, ITIS would automatically record the name of user, time of retrieving information and what type of information is accessed by the concerned officer, Qudrat Ullah added.

He demonstrated that if a tax officer wants data of Corolla cars registered in Model Town area of Lahore after 2000, a click on the computer showed that 486 cars were registered along with the details of their owners. Moreover, it also showed how many owners of cars have NTN and other information.

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