ISLAMABAD (November 02, 2010) – The World Bank review mission has asked the Federal Board of Revenue (FBR) to develop a simple accounting system for small taxpayers by March 2011 to encourage documentation in the country. Sources told reporters here on Monday that the FBR has a huge number of small taxpayers in its taxpayers' register.
Many of the taxpayers cannot afford the costs of hiring a tax consultant or purchasing accounting software. Some countries have decided to develop/purchase a simple accounting system and provide copies of it to their small taxpayers free of costs. This simple accounting system should be very easy to use, should help the taxpayer with his bookkeeping and should produce the information required by the FBR.
In some countries, the accounting programmes are available at the tax department website and the small taxpayers can use the department's computer storage to keep their accounting. This would be a huge step in Pakistan toward the documentation of the economy and to further broader the GST base. The WB has recommended the FBR to develop or purchase a simple accounting system for small taxpayers by March 2011.
According to the WB report, there are many alternatives for payment systems. These alternatives will differ in terms of technological advances, ease of payment, and possibility of payment through the Internet. First option is the electronic payment through direct debit in the taxpayer account as a result of a return or payment form filed with the tax administration web site.
Second option is the electronic payment made through the taxpayer bank's web site, based on a payment slip provided by the tax administration or produced by a program provided by the tax administration. Thirdly, electronic payment could be made through the taxpayer bank's web site, based on a generic bill payment system developed by the bank itself.
Fourthly, the option is to make payment in an ATM based on a tax payment system developed by the bank itself. Fifthly, the payment could be made in a bank cashier using a pre-printed payment slip with bar code or similar computer readable document.
The WB said that the first alternative (direct debit) is the most convenient for tax administrations and taxpayers. However, many taxpayers are reluctant to adopt it. The second and the third options are similar. The difference is that the second requires more co-ordination between the tax administration and the banks. The third is merely a service that banks provide to their client to pay their bills. These two alternatives can be combined as it has been done in some countries.
The WB report said that the payment at ATMs is also convenient, although taxpayers have to go to an ATM. The payment at a bank cashier using pre-printed (bar coded) documents is an improvement, but taxpayers still have to go to a bank and might need to stay in line to make a payment.
Finally, payment through credit cards might be an appealing alternative. However, the problem with credit cards is their high transaction cost and the delay in having the tax payment deposited in the treasury account, the WB said.
The tax administration would be more successful in terms of popularisation of electronic payments if taxpayers had different options to choose. Thus, if they don't like a particular way of payment they can use another one, the WB report added.