About 25,000 cars are likely to be imported in
2005-06 in the backdrop of liberal incentives given to the expatriates
and further reduction of customs duty in the new budget, which would
certainly cause a big dent in the black-marketing of locally
manufactured brand new cars.
Chairman Central Board of Revenue Muhammad Abdullah
Yusaf disclosed this recently at a Forum at Lahore.
"In 2004-05 about 7,000 cars were imported,
but we estimate that in this fiscal up to 25,000 cars would be
arriving in Pakistan as we have further liberalised and relaxed the
scheme for overseas Pakistanis, giving maximum incentives to the
expatriates and have also further trimmed duty," said the
Chairman CBR Abdullah Yousaf, Member Tax
Facilitation Fakhruddin Habib, Regional Commissioner Income Tax Haji
Ahmed, Collector Sales Tax Muhammad Nazim Saleem and Collector Customs
Saqib Mehboob participated in the Forum.
Chairman CBR pointed out that with the arrival of
7,000 cars in last fiscal, the premium of locally produced cars in
domestic market had already squeezed and it would further drop with
the import of a record number of cars in 2005-06.
He said that the overseas Pakistanis had been
allowed to gift cars to their relatives, an incentive that was earlier
not allowed, and this benefit would lead to a substantial increase in
the import of cars.
Chairman CBR said that in the past several
conditions were attached with the baggage rules that proved a hurdle
in the way of import of cars by the expatriates. But the government
had removed almost all the major hurdles, giving a chance to overseas
Pakistanis to send cars of their choice to their relatives and to curb
the trend of extortion of money in the name of premium from the
buyers, he added.
He also disclosed that the CBR would not send the
cases of tax defaulters to the National Accountability Bureau (NAB),
adding that the tax default cases are civil matters and these could
not be referred to the NAB.
Chairman CBR maintained that the list of tax
defaulters was still not final and it was a disputed and sub judice
matter as almost all the cases of default are lying with different law
courts for hearing.
"As long as the courts do not decide the cases
of taxpayers (mentioned in the CBR's list of defaulters), CBR cannot
declare any one defaulter on its own," he added.
"We raise the demand of tax revenue and the
taxpayers contest it, and in case the demand does not match with their
resources the case is then referred to the relevant court for final
decision," he said.
Abdullah Yusaf also disclosed that the federal
government has broken the racket of diplomats by tightening the rules
of cars' import under the diplomatic car scheme.
In the past, several diplomats misused the scheme,
but during last fiscal the government has incorporated sweeping
changes in the scheme and discouraged the trade of cars, imported by
diplomats posted in Pakistan, he said.
He elaborated that in the past the diplomats were
allowed to dispose of their imported cars without the payment of taxes
and duty after the expiry of a prescribed time limit.
But now the diplomats of only a few countries enjoy
the facility of disposing of cars without the payment of duty and
taxes that too on reciprocal basis while a majority of diplomats are
required to pay the prescribed rates of taxes, he added.
He said that this major change in the diplomatic
car scheme has discouraged the clandestine trade of cars and it helped
the government in dismantling the racket of diplomats engaged in this
To a question the CBR chief admitted that the
existing 9.4 per cent tax-to-GDP ratio was still low, adding that
Pakistan's tax-to-GDP ratio was higher than Bangladesh but lower than
He, however, said that the reforms process has
improved the compliance gradually and it has changed the tax culture.
Elaborating the reasons for low tax-to-GDP ratio,
the chairman said that the share of agriculture sector in the GDP was
21.5 per cent and 1.2 per cent only in taxes; manufacturing sector's
GDP share stood at 15.9 per cent and in tax revenue its share is 61
per cent; while services sector's contribution to the GDP was over 50
per cent and 25.5 per cent in taxes.
He said the low contribution of agriculture and
services sectors has highlighted the need to diversify the untapped
areas or sectors for broadening the tax base.
The CBR Chairman said that the government had to
invest a lot in different sectors such as ports, roads, transportation
and other infrastructure for further accelerating economic activity.
The CBR has fulfilled its commitment of not carrying out audit of
returns, filed under the universal self-assessment scheme, he said and
added that for obtaining sustainable growth rate more people from
private sector would have to be brought into tax net considering that
private sector was an engine of growth. He said that they were
maintaining contacts for educating masses and chambers to join CBR in
To a question he said that they were trying to
facilitate taxpayers at optimum in filing their returns
electronically, enabling them to have minimal contact with the
collectors. He hoped that during next month Karachi and Lahore
stations would be inter-linked so that Lahore businessmen could have
information about what was being cleared at Karachi.
Responding to a query, the chairman said that all
issues would be discussed at length for making the tax system more
user-friendly. He said that lowering the sales tax rates on numerous
items as well as removing the irritants and impediments in the
procedures, the tax base had been widened and sales tax revenue
registered phenomenal increase.
Abdullah Yusaf said that the CBR and the federal
government have taken several tax facilitation initiatives such as the
zero-rated tax facilities for five leading export sectors, including
textile, swift payment of refunds and timely disposal of pending
Replying another question he said that within two
years the CBR would offer incentive-laden pay and perks package to the
taxmen to further improve their performance and to sustain
Talking about the implementation of reforms
measures, he said the Large Taxpayer Unit (LTU) has been established
in Karachi since July 01 ,2002. The performance of this unit has been
very impressive, he said, adding collection of three domestic taxes,
sales tax, central excise and income tax has shown an impressive
increase against national increase.
Encouraged by the positive response of LTU at
Karachi another LTU has been set up at Lahore in June 2005, while a
Medium Taxpayer Unit (MTU) has already been working in Lahore since
Acknowledging the success of MTU Lahore, three more
MTUs at Rawalpindi, Peshawar, and Karachi have also started working.
MTUs at Quetta and Faisalabad will also become operational by
September 2005. These five MTUs will be included in Regional Tax
Offices (RTOs) along with seven more RTOs at Hyderabad, Sukkur, Multan,
Lahore Gujranwala, Sialkot, and Abbotabad. These units will start
functioning by the end of this financial year.
As a first step towards Electronic Compliance
Mechanism, filing of statements of withholding taxes has been routed
through electronic media at LTU Karachi, besides Income Tax Return
electric filing system is also coming up shortly, he said.
Chairman CBR further said a Custom Administration
Plan (CARE) to modernize customs clearance and a pilot project was
launched in April 2005 and it will be rolled out at 10 customs
stations in the next 18 months.
Abdullah Yusaf said that a software has been
developed for Withholding Tax Management which is capable of preparing
withholding statements through recording transactions liable to
He concluded that CBR, under its reform programme,
is making efforts to reduce compliance cost of taxpayers and develop a
tax culture while tax officials are being trained with a view to
change their mindset towards the taxpayers.