In this fiscal up to 25,000 cars would be arriving in Pakistan

From KHALID BUTT, Lahore
Sep 12 - 18, 2005

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.

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 trade.

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 other countries.

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 its initiative.

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 cases.

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 tax-friendly environment.

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 October 2002.

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 withholding taxes.

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.