Sales tax return form being redesigned

KARACHI (April 08 2006): Member, Sales Tax, Central Board of Revenue (CBR), Shahid Ahmed, informed the business community on Friday that CBR was redrafting sales tax return form to collect more information about tax payers.

Addressing members of Lasbela Chamber of Commerce and Industry (LCCI) here on Friday, he said that the present format of sales tax return form gives very little information about the taxpayer.

He said that the draft of the new sales tax form would be sent to all chambers and associations for comments and suggestions. He said that the Sales Tax Department is simplifying the return procedure and is setting a different mechanism for tax collection.

Shahid said that the department has established a task force at its Islamabad office to feed data of sales and purchase of taxpayers. This will help the department in quick completion and processing of sales tax refunds claims. Sale/purchase advices are very important for refund process, he added.

He said that the department is also establishing a website on which the sales tax refund claimant can see his sales tax refund status. The web site will have all details of sales tax claim–where it was, and whether there is any objection, and what it is.

The Member, Sales Tax said that there are 120,000 registered units under sales tax, out of which 80,000 paying sales tax. In the total, the share of sales tax collection–66 percent–is from the manufacturing sector.

Shahid said that up to the end of March 2006 around Rs 202 billion was collected under sales tax head, which is 23 percent more than last year's corresponding period. Referring to the question of higher rate of sales tax, he said that earlier there were four different slabs of sales tax. Now a single rate of sales tax, at the rate of 15 percent, exists. “There is no proposal under consideration to reduce this rate of sales tax”, he added.

About tax-to-GDP ratio, he said that Pakistan has the lowest tax-to-GDP ratio in the region. There are many ways to increase this ratio including revising the threshold, from the present Rs 5 million to Rs 2 million, imposing flat rate on small traders, etc.

He said that another way to increase tax base is to collect details of gas, telephone, and power bills and air travels to identify potential taxpayers.

He said that he has already directed the collectorates to work with the chambers and association to identify potential taxpayers.

Shahid said that the department has started receiving budget proposals, and advised the business community to send budget proposals, in detail, so that they should be examined and incorporated in CBR budget proposals.

Welcoming the guests, LCCI President Dr Muhammad Aslam said that the major problem of the present tax system is that the entire burden of taxation is borne by a microscopic minority consisting of industrialists, businessmen and salaried classes, constituting about 1 percent of the population.

He said that increasing dependence of overall revenue on just a few sectors of the economy poses serious risks to fiscal stability, as shocks to these sectors can derail the fiscal disciplines and would put constrain on the growth of these sectors, which currently carry the tax burden of the whole economy.

He said that this calls for broadening of the tax base and coverage of under-taxed sectors. This will increase the elasticity and buoyancy of the tax system, he added.

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