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Procedural hurdles in tax collection to be cut in next budget: CBR

ISLAMABAD (March 07 2003) : Central Board of Revenue (CBR) Chairman Riaz Ahmed Malik has said that the next federal budget (2003-2004) would focus on minimising the procedural hindrances in tax collection to ensure better compliance by the tax-paying community.

The revenue target for the next financial year should be at least 10-12 percent higher than the original target of Rs 460 billion for current fiscal year, taking into account the GDP growth.

The major General Sales Tax (GST) exempted items like tractors, agricultural and information technology equipment would continue to enjoy the same benefit in the upcoming budget to ascertain rapid progress of these sectors.

The four existing customs tariff slabs would not be changed in the next fiscal budget, however, rates of custom duty on certain items and raw materials would be revised in consultation with the Ministry of Industries and Production.

The CBR would introduce 'three dots' and 'four dots' tariff lines in the Pakistan Custom Tariff (PCT) Manual in the Budget 2003-2004.

The issue of GST exemption on the import of generators would again be discussed in the Economic Co-ordination Committee (ECC) of the Cabinet, considering the viewpoint of the Ministry of Water and Power.

The recommendation of CBR's Consultant, Maxwell Stamps, to abolish the Third Schedule of the Sales Tax Act-1990 would not be implemented in the coming budget.

The tax authorities are not taking up any proposal to launch new tax survey in major cities for collecting taxpayers' data through physical verification.

In an interview with the Business Recorder here on Thursday, Chairman CBR Riaz Ahmed Malik said that the tax managers would try their level best to eliminate hurdles and facilitate taxpayers in the coming budget.

However, authorities would ensure to remove procedural difficulties being faced by the taxpayers pertaining to documentation, which will help improve compliance by them.

The department would also introduce effective measures to ensure implementation of the tax procedures from the new financial year.

He said that the CBR has effectively used the information collected through tax survey.

“Of course, it is not possible to utilise all the tax information just in one day or one year. It is a continuous process. In this regard, the information collected through 'individual tax profiles' would be upgraded as well as enhanced for utilisation in an appropriate manner.”

At present, the CBR is not considering to launching any new tax survey in the major cities of the country, he maintained.

Riaz Ahmed Malik stated that the tax reform strategy, prepared by the CBR'S Consultant Maxwell Stamps, is in the final stages. The mechanism devised by the consultants would be completed in a month or so, he added.

Commenting on the withdrawal of GST exemptions from fiscal 2003-2004, he said that major GST exemptions of the Sixth Schedule of the Sales Tax Act-1990 have already been taken away.

These sectors encompass urea, electricity and gas etc. Now, the authorities did not intend to withdraw any major GST exemption in the upcoming budget.

Presently, Sixth Schedule of the Sales Tax Act, 1990 did not contain any item on which the GST exemption needs to be rolled back.

The GST exemption on tractors, agricultural equipment and IT components would not be touched in the budget.

When asked about the removal of Third Schedule of the Sales Tax Act-1990, Chairman CBR said that there is no need to make amendment in the Third Schedule.

Responding to another question, Riaz Ahmed Malik said that exemption of GST is already available on the large size generators, reason being this that electricity generated through this apparatus is liable to sales tax.

Economic Co-ordination Committee (ECC) of the Cabinet has given approval of the GST exemption on the import of small generators.

However, the Ministry of Water and Power has its own viewpoint on the issue, which would be taken up in the ECC.

He pointed out that the main thing to understand is that the machinery and equipment used in power production should be exempted from sales tax as the electricity produced by such equipment is subject to GST.

The matter would again be reviewed by the ECC of the Cabinet, he added.

The Chairman CBR categorically said that the tax authorities have not withheld sales tax refunds of the business community to the tune of Rs 30 billion.

The CBR has not stopped payment of sales tax refunds, while the implementation of the newly introduced STARR automation programme has slightly delayed the payments, he added.

The CBR has paid an additional amount in sales tax refunds to the tune of Rs 2.5 billion in January 2003.

Similarly, an additional amount from Rs 1.5 to 2 billion has been made to the exporters in February.

This clearly shows that the CBR has issued an additional amount in sales tax refunds to the tune of Rs 4 to 5 billion in just two months, he said.

That is why the exporters have not recently raised voice against the delay in the payment of sales tax refund, he added.

“When the CBR held meeting with the exporters on the sales tax refund issue, the business community itself modified their claims which reflects that the allegations of accumulation of Rs 30 billion refund is not correct,” he said.

When asked about the revision of custom slabs in the coming budget, Riaz Malik said that the rate of duty as per existing slabs would not be revised in the budget.

However, duty structure on some items/raw materials would be moved upward/downward in consultation with the Ministry of Industries and Production, he added.

In the new budget, the CBR would introduce 'three-dot' and 'four dot' tariff lines to differentiate between certain types of items.

For example, telephone would be placed in the three-dot tariff lines as per HS Codes and its types and specifications would be included in the four-dot tariff lines for the purpose of levying import duty, he added.

The Chairman CBR said that the current fiscal target is Rs 458.9 billion, which is almost in close proximity to the actual target of Rs 460 billion.

The new target of the next fiscal should be at least 10 to 12 per cent more than the original target of current financial year, depending on the GDP growth.

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