Rs 419 billion additional revenue to be generated: new tax, administrative measures for fiscal year 2014

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The Federal Board of Revenue is to announce new tax and administrative measures to generate additional revenue of Rs 419 billion during FY14, official sources told Business Recorder. The sources said, FBR has estimated Rs 2.347 trillion revenue projections for the next fiscal year. This projection is based on 14 percent nominal GDP growth rate estimated by the Ministry of Finance.

"If the proposed tax policy and administrative measures are approved by the government, the projection would be Rs 2.756 trillion, ie, 10.4 percent of GDP," sources continued. According to the FBR, energy crisis, law and order issues, slow growth in large scale manufacturing and huge slump in imports, along with unfavourable conditions severely impacted on the revenue.

Reduction in rate of sales tax on major revenue spinners such as plastic, iron and steel, chemicals and tea, increase in cost of exemption of capital goods, shifting of services to provinces, abolition of FED from certain sectors and enhanced impact of Free Trade Agreements (FTAs) also affected the revenue position. Despite these impediments, FBR's net collection up to February 2013 stands at Rs 1.162 trillion showing a growth of Rs 4.6 per cent over previous fiscal year. The sources further stated FBR has launched a massive campaign against non-filers and tax defaulters and around 2.5 million notices are being issued besides effective administrative measures for plugging loopholes in the system. The FBR is expecting to reach the revised target of Rs 2.193 trillion at the end of the year by generating sufficient revenues from these measures during the remaining period of current fiscal year.

To achieve the desired goal during current fiscal year and mid to long term period, following budget strategy has been devised by FBR for implementation: (i) withdrawal of zero rating on domestic supplies other than export sector. Incorporation of all remaining zero rating and exemptions granted through SROs in the Fifth and Sixth Schedule to the Sales Tax Act; (ii) risk management system for addressing the menace of illegal input adjustments and refunds; (iii) development and launching of risk management system; (iv) safeguarding government revenues by checking illegal input adjustments, and refunds payments, by generating discrepancy reports on the basis of RMS; (v) improvement in valuation of domestic supplies; (vi) identification of sectors for fixation of values; (vii) expansion of schedule to Sales Tax Act for revenue maximisation; and (viii) more items sold in retail package to be brought under 3rd schedule for taxing these items on the basis of retail prices and imposition of further tax on supplies to un-registered persons.

To enhance area of Federal Excise Duty following measures will be taken: (i) Meeting with stakeholders for reducing the existing 4 slabs system to 2 slabs system; (ii) expansion of FED coverage; (iii) identification of sectors for levying FED; (iv) specialised audit of telecom sector to be outsourced to Nadra; and (iv) bringing lubricating oil and Bitumen under FED net and electronic enforcement of cement, beverages and sugar. Proposed measures in direct taxes will comprise of Tax Registration Enforcement Initiatives, 2012 and Investment Tax Scheme, 2012. Tax Registration Enforcement Initiatives 2012 has been devised to register and bring into the tax net non-filers of tax returns.

Investment tax scheme 2012 is devised to provide a mechanism and to cover regular filer in addition to non-filers of income lax returns to declare un-declared income assets/expenditure upto the value of Rs 5 million by payment of token tax.

Effective monitoring of withholding taxes, effective mechanism for monitoring/reforming the withholding agents, revival of Regional Withholding Units (RWUs), effective dispute resolution mechanism and simplification of ADRC mechanism and co-opting of relevant stakeholders are some of the measures to be taken to expand of FED areas of coverage. There would be a review of exemptions and concessions for minimising the scope of concessionary rates of customs duty, removal of distortions and reducing the number of SROs. Moreover, concessionary regime will be incorporated into tariff for simplicity and transparency and roll out of customs automated clearance system.

Courtesy: Business Recorder

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