The revenue collection which provides fuel to run the
vehicle of the socio-economic and political systems largely depends on
the implementation of the policies and honest compliance by the
taxpayers. This is the candle, which can burn from both ends if the two
sides are not faithful to the purpose.
In our case, getting jobs in tax collection agencies
is considered highly lucrative much sought after even by the
professionals like doctors and engineers. Presence of a number of these
professionals in revenue collection departments is obviously indicative
of the trend and self-explanatory.
The overall performance of the taxation system
depends on its revenue generation, which is generally gauged by the tax
to GDP ratio.
Compared to buoyant growth in CBR tax collection
during 2001, receipts increased by only 3.0 per cent during financial
year 2002. The marginal net growth was weaker than real GDP growth and
the inflation rate, mainly due to an unexpected decline in import based
tax and exceptionally high tax refunds.
Besides the decline in import there were other causes
into decline of sales tax collection especially by the importers through
unfair means. Although cases of tax evasion can not be materialized
without connivance and support of the tax officials and there is a need
for effective checks and balances especially in those departments where
officials have to come into public dealings.
In order to improve collection of sales tax, which
contribute in the overall tax collection, the CBR authorities have
issued directives to generate sales tax at the import stage by taking
stern action against the unscrupulous importers.
The sales tax projection for 2002-2003 at the import
stage is Rs108.75 billion showing an increase of Rs16.15 billion of 17.5
pr cent as compared to collection of Rs92.6 billion during previous
The pace of increase in revenue collection is much
less than the desired level of growth, which prompted the authorities to
plug in loopholes at the import stage.
Under a new action plan to achieve sales tax target
of Rs108.75 billion at the import stage. The federal tax authorities
have ordered investigation against importers allegedly involved in
clearance of consignments using fake sales tax registration certificates
and sales tax returns.
In some cases import registration was obtained on
dubious NICs and bank accounts were opened on the same fake identity
cards. These tax evaders obtain L/C pro forma from the same bank but
never opened L/C for import of raw material etc.
The Central Board of Revenue has started countrywide
operation against the gang of importers and clearing agents importing
goods using name of other sale tax registered importers.
The authorities have unearthed cases where bill of
entries were removed from the record of Pakistan Revenue Automation
Limited (PRAL) in connivance with the employees and fake sales tax
registration certificates were issued by the sales tax officials.
It is impossible to check any sales tax fraud without
the help of customs department, which is responsible for clearance of
In view of the huge sales tax evasion by the
importers, the CBR has forthwith established a customs Liaison Cell in
each collectorate of Sales Tax and appointed customs officials as in
charge of these cells. They have been assigned the job to receive data
and coordinate with the sales tax and customs department to hunt such
importers. A number of such importers had allegedly submitted fake
registration certificates and sales tax returns for clearance of
imported goods. This is a clear violation of Sales Tax General Order,
which binds each importer to produce copy of sales tax registration and
sales tax returns for the preceding month in order to file bill of
The data pertaining to the registration/returns of
the importers for each month is already available with the PRAL.
To eliminate the chances of fraud, the collectors of
customs would ensure clearance of imported goods only after verification
by PRAL. In case information about the registration or filing of returns
is not available with PRAL, the same would be obtained from the
respective collectorate of Sales Tax. A large number of importers in
connivance with clearing agents, import goods using name of other sales
tax registered importers either by purchasing import authorities or by
committing fraud without taking the registered sales tax importers into
Such importers do not declare any value addition and
occasionally file sales tax returns without clearly indicating net
payable amount of sales tax. The habitual violators change their
declared addresses and are not traceable for audit purposes. However,
official maintained such type of fraud is not possible with the active
support of the clearing agents. Hence, all clearing agents have been
warned to strictly follow rules of the Customs. It is learnt that
Collectorate of Sales Tax Karachi (East) has made a break through in
detecting tax evasion by importers. Investigation and prosecution
branches of all collectorates of customs have been given assignment to
detect similar cases by using techniques adopted by Collectorate of
Sales Tax Karachi.