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ICAP urges steps to promote tax compliance culture

ISLAMABAD: The Institute of Chartered Accountants of Pakistan (ICAP) has said that the corporate sector, being the most documented segment of the economy, has been neglected by the government in its effort to cater to annual budget targets.

On the other hand, the services, wholesale/retail, transport and agriculture sectors are still not fully documented; their contribution to the national exchequer is negligible; and the majority are still out of the tax net, ICAP Chairman Rashid Ibrahim said here on Thursday, while announcing key recommendations submitted to the government for budget 2016-17.

He was of the view that the ‘voluntary tax compliance scheme’ recently announced by the government was another immunity scheme that had failed to achieve its objective.

ICAP had formed a committee on taxation to devise tax proposals aimed at assisting the government in improving revenue collections, ensuring voluntary tax compliance and building tax payers’ confidence, leading towards a tax compliant culture.

Mr Ibrahim said there is consensus among tax experts that most of the problems stem from weaknesses in the effective implementation of fiscal laws. “There is a dire need to upgrade the human resource of the FBR, IRIS software and the governance structure of the board. We have submitted proposals in this regard,” he said.

ICAP has suggested that the appellate process, which has a vital role in facilitating taxpayers, needs to be revamped. With a view to bring transparency and win taxpayers’ confidence, it is imperative that the Commissioner (Appeals) be brought under Ministry of Law and Tribunals.” Currently, taxpayers are compelled to recourse to courts to obtain a stay against the decision of tax authorities,” he said.

The ICAP chairman said that tax audit is yet another weak side of FBR as well as that of provincial authorities. “There is an urgent need for capacity building of field formation officers with specialised training to undertake the challenges of tax audit under one roof by representation of all revenue authorities instead of audit, revision, rectification and monitoring under three federal and four provincial tax laws,” he said.

An effective audit acts as a deterrent against misreporting, fraud and tax evasion, said Mr Rashid, adding that the tax on services through provincial laws is creating complications for genuine taxpayers. “Complete harmony in federal and provincial sales tax laws, interpretation thereof and single return showing federal and provincial figures is required to relieve taxpayers from unwarranted litigation, undue hassles and reduce the cost of doing business,” the ICAP chief said.