WB report says every Pakistani evades taxes

WB report says every Pakistani evades taxes

ISLAMABAD: A World Bank report reveals that every man, woman and child in Pakistan is evading taxes worth Rs4,800 annually and stresses on reforms on administration and policy side to plug these massive leakages.

It also stated Pakistan was witnessing a massive tax evasion as existing tax gap stood at 67 per cent of the actual tax receipts.

The World Bank in collaboration with the Federal Board of Revenue (FBR) and Andrew Young School of Policy Studies of Georgia State University launched a Tax Policy Report on Pakistan here on Saturday.

Secretary Revenue Division/Finance Salman Siddiq said in his address that there was no other solution but to focus on revenue generation efforts to run the affairs of the state.

�We plan to undertake the much desired reforms on both administrative and policy side,� he added.

The World Bank�s Acting Country Director Said Ul Habsy said that the FBR was not very popular in the country as compared to other tax collecting agencies around the world. He said that the government was considering the option to impose Value Added Tax (VAT) in order to generate its revenue.

In the report, the WB proposed to introduce taxation of short-term stock market related capital gains and tax stockbroker�s income according to the non-salaried income tax schedule.

The WB also asked Pakistan to eliminate 5 marla tax exemption, reduce agriculture income tax from 12.5 acres to 7.5 acres in Punjab while increase this limit up to 7.5 acre in case of NWFP.

The WB also proposed to impose motor fuel tax with increase in token tax.

The WB proposed to redraft the sales tax act to convert general sales tax into modern Value Added Tax, design as shared federal-provincial tax covering both goods and services and under federal administration with expansion in base.

It suggested the government to bring additional luxury goods and services under excise taxation. In this regard the reports has suggested to bring federal excise duty law in line with the sales tax law.

The report has proposed to the government to bring maximum duty rate from 25 per cent to just 10 per cent and introduce three tier duty slabs of 0 per cent for raw materials and capital goods, 5 per cent for intermediary goods and 10 per cent duty on finished products.

It has also suggested combining tariff reduction with sequence of separate measures to avoid overall revenue loss, including elimination of existing tariff exemptions and increase in excisable imports as well as expansion of yield from general sales tax.

It also sought to reduce tariff dispersion, especially at disaggregated level.

The World Bank proposed in the area of corporate tax to the government to introduce corporate income tax with lower rate and wider base. Other proposal sought to limit the use of exemptions and tax incentives for industrial policy.

Making withholding tax adjustable for formal or documented economy, limit favorable withholding tax rates for informal economy, eliminate withholding taxes that generate only small revenues have also been proposed.

To enhance provincial tax collection the World Bank report has proposed to eliminate five Marla tax exemptions, eliminate preferential treatment of owner-occupiers.

Bring in new property valuation roll in Punjab, upgrade valuation table in NWFP, bring land and structure to same basis, adopt single rate in Punjab and tie TMA rate setting to provincial transfers.

It has also proposed to abolish registration tax or shift to federal level, increase the token tax rate on vehicles, introduce unified annual licence tax on motor vehicles and also adopt a motor fuel tax.

Regarding taxing professional income the World Bank report has proposed to introduce at 3 per cent piggyback on federal individual income taxes.

In order to improve property tax collection the report has proposed to improve valuation method, update property records and introduction of unified annual tax on rural lands.