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New tax culture from January 2001

From SHAMIM AHMED RIZVI, Islamabad
 Jul 24 - 30, 2000

Federal Minister for Finance, Mr. Shaukat Aziz while talking to the newsmen informally at the conclusion of Dr. Mehboob-ul-Haq Memorial Seminar in Islamabad disclosed that a new tax system would be put in place from January 2001. The new system, he claimed, would be simple and understandable providing maximum facilities to the taxpayer and curtailing drastically the discretionary powers of taxation authorities.

The new system will be formulated in the light of the report of the committee on restructuring of CBR and taxation system and results of the on going tax survey of 13 major cities of the country which is likely to be concluded by Oct. 2000. "The current taxation system is defective and, therefore, it has to be thoroughly reviewed and suitably amended," he added.

Mr. Aziz said the committee on restructuring of CBR, headed by Shahid Hussain had submitted its initial report. "We reviewed the report at a meeting and decided to set up a 10-member advisory board, consisting of two tax lawyers, two businessmen, two academics, one information technology expert and CBR officials.

In addition to that, four task forces would also be constituted to propose reforms in the taxation system. One of the task forces would deal with human resources and Dr. Wasim Azhar would be its coordinator. Under the task force on tax processing, separate committees on income tax, sales tax, customs duty and central excise duty would be set up to simplify the payment of taxes and to ensure minimum contact between the taxpayers and the officials.

Separate method would be devised for the collection of sales tax, custom duty and central excise duty. The task force on information technology would help restructure the CBR on modern lines, Dr. Altamash Kamal will be the coordinator of the task force. The advisory board and task forces would give their recommendations to the government by Oct. 30 on which the opinion of the public would be sought. And these recommendations will be announced before Dec.31.

The task force on tax administration reforms will review causes of corruption among the staff and the management of the CBR. The task force on tax administration reforms has been constituted to suggest measures to improve efficiency of taxmen, which lack skills and ability to generate additional revenues for the country.

Tardy tax system, weak enforcement of policies and rampant corruption has resulted in non-compliance and widespread tax evasion in the country. Tax to GDP ratio has narrowed down to around 10 per cent and, only one out of every 100 people is paying taxes.

Though the recently launched drive to enforce documentation through tax survey is a key to all future revenue needs of the country, tax administration reforms are needed to simplify the procedures to facilitate taxpayers in a transparent manner.

The task force on tax administration will investigate and recommend measures to improve the ability of tax machinery to collect taxes efficiently, with integrity and without undue coercion of taxpayers.

The main objective of the task force would include.

•Review the causes of corruption among staff and management of the tax administration and recommend measures to eliminate corruption.

•Review the existing management and policies of the CBR and its subordinate organisations to evaluate their effectiveness.

•Review the management of human resources, including recruitment, training, promotion, evaluation of performance and discipline.

•Review the compensation system for its effectiveness in attracting and motivating qualified persons and ensuring integrity.

•Review system and processes, particularly for the management of information as a key ingredient in improving the effectiveness of the tax machinery.

•Review the organisation and structure of the tax administration in relation to the needs of cost minimisation, speedy processing and decision making, engendering a sense of service and accountability.

The legal and administration status of the CBR and its subordinate organisations would also be reviewed.

The task force will be supported by the CBR for research and analysis of specific issues. It will hire consultants on subjects where the required expertise is not available. It will seek the views of organizations representing taxpayers, tax accountants and tax lawyers on the issues they face viz a vis the tax administration.

The task force will also chalk out a detailed implementation strategy and would design a roadmap to achieve the end goals set in the final report, which would be presented to the Finance Minister by December 2000. The task force comprises the following.

Syed Shahid Hussain, Chairman, Badruddin B. Vellani, Vellani & Vellani Advocates; Athar Minaullah Afridi, Shah & Minaullah Advocates; Naeem Akhtar Sheikh, FCA, S. M. Masood Chartered Accountants; Shabbar H. Zaidi, FCA, AF Ferguson Chartered Accountants; Khawar A Khawaja, Chief Executive, Grays of Cambridge; Ahsan M. Saleem, Crescent Steel and Allied Products Limited; Dr. Waseem Azhar, LUMS; Shahid Amjad Chaudhry, Lahore School of Economics; Altamash Kamal, XIBER.CDM Syed Riaz Hussain Naqvi, Chairman CBR; and Ahmad Khan, Member Monopoly Control Authority. Mr. Ahmad Khan will also be the secretary of the task force.

The task force gave a briefing to the Chief Executive General Pervez Musharraf in Islamabad informing him of the methodology on which it was working. In principle agreeing with the lines on which the task force was proceeding the Chief Executive, once again stressed major structural reforms in the tax administration. Regretting mistrust between the taxpayers and the tax collection authorities, he ordered that the services, particularly the tax administration, should be turned into an efficient, viable and corruption free institution.

General Musharraf said the mistrust between the taxpayers and the tax collection authority, "has become even more apparent during the recent survey" and the drive to document the economy. He stressed the need to evolve and implement a system at the earliest by which the discretionary powers of the tax collecting agencies could be minimized.