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Pakistan can collect revenue to the tune of Rs2600 to Rs 2700 billion

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by June 20, 2012 General

Karachi, June 20, 2012 (PPI-OT): Pakistan can collect revenue to the tune of Rs2600 to Rs2700 billion if the tax to GDP ratio is raised from the current about 9 per cent to 13.8 per cent, where it was in 1987. This was stated by Federal Tax Ombudsman (FTO), Dr Muhammad Shoib Suddle. Speaking at a luncheon meeting at Korangi Association of Trade and Industry (KATI) on Tuesday, the FTO said that attaining 13.8 per cent tax to GDP ratio is easily possible if the colonial mindset of tax collection machinery is changed forthwith.

“We are still in the hangover of colonial system that’s why we are far behind the rest of the world in tax collection”, Dr. Suddle said adding that with slight improvement in the tax system, an additional revenue to the tune of Rs800 billion could be generated and the country would not require any foreign aid or Kerry Lugar Bill. With significant improvement in the tax collection system, the tax to GDP ratio could be doubled to about 17-18%, raising the tax revenue to Rs4000billion, Dr. Suddle said.

He further said that on the recommendation of the FTO in the case of missing containers, the definition of smuggling had been changed in the Finance Act of 2012, and, for the first time, any en route pilferage of transit cargo would be treated as falling within the ambit of smuggling.

He informed that the volume of smuggling through Afghanistan bound containers had been reduced by over 60 per cent as a result of the FTO report. In other words, less than 4,000 containers were now likely to be pilfered as against every 10,000 in the (pre-report) 2007-2010 period.

This was a monumental success of a report by any standards. This drastic reduction was without putting in place any of the recommended preventive measures. The pilferage ratio could be drastically reduced by tightening the loopholes in the system, as proposed in the FTO report.

He added that additionally the exchequer was now earning over Rs1 billion per month by way of duty from containers that were, per force, being cleared through the regular channels, all other factors being equal.

He informed that about 500 cases decided by the FTO during 2009, 2010 and 2011 were pending with the FBR, awaiting implementation. He said that if the decisions of the cases were not implemented the respondents would be issued contempt notices.

He said that FTO office on average would receive about 1,500 applications annually and the average period of disposal of a case had been exceptionally reduced from 117 days in 2009 to 67 days in 2010 to less than 60 days in 2011, which was a record even by international standards.

He said that almost 85 per cent of decided cases were in favour of the taxpayers while elsewhere the situation was otherwise. He said that it showed how widespread was the level of maladministration in our system.

“We have achieved the milestone of clearing all backlog of the previous cases”, Dr. Suddle said, adding that the volume of pending refund claims reached an unacceptably high level of Rs144 billion in June 2011. Replying to the President All Karachi Industrial Alliance, Mian Zahid Hussain, he said that FTO office has directed the FBR not to seize accounts of the taxpayers unilaterally and without giving prior notice to the taxpayers.

He further said that issue of undue harassment by the tax department to the taxpayers would addressed earnestly. Dr. Suddle said that he would consider taking one of KATI’s members into Advisory Council of FTO. He invited KATI’s chairman and Mian Zahid Hussain to hold meeting once a month to discuss the taxpayers-related issues.

Chairman KATI Ehtesham Uddin in his welcome address said that the nature and extent of tax maladministration cases decided by the FTO showed that Pakistan’s tax system was not working properly. He said that the taxpayers who are paying tax should be encouraged. He said that FTO is playing a vital role in providing relief to the tax payers. He offered to establish FTO cell at the KATI premises in order to have a better and effective coordination between the FTO and industry.

FPCCI’s Chairman Standing Committee on Sales Tax, Mian Zahid Hussain said in his address that FTO office is doing a commendable job to provide relief to the aggrieved taxpayers. He drew the attention of FTO towards harassment by the tax department by issuing notices without giving chance of hearing to the taxpayers. He requested the FTO to also take notice of lodging of FIRs against taxpayers by the FBR without following any system or criteria.

He said that harassment to the taxpayers was creating panic among the taxpayers and this situation would encourage them to use underhand means to get away with their tax liabilities. He asked the FTO to appoint a monitoring committee which should monitor the system of FBR or appoint someone from KATI as member Advisory Committee FTO. The FTO expressed his willingness to take appropriate action on all the points raised by Mian Zahid Hussain.

For more information, contact:
Nadeem Ahmed
Press Secretary
Korangi Association of Trade and Industry (KATI)
ST-4/2, Sector 23, Korangi Industrial Area,
Karachi 74900
Tel: +9221 3506 1211 -2
Cell: +92346 2012346
Fax: +9221 3506 1215


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