Aurangzeb emphasises digitalisation of tax system
ISLAMABAD: Finance Minister Muhammad Aurangzeb on Wednesday stressed the urgent need for digitalisation of the Federal Board of Revenue (FBR) to enhance transparency and efficiency in tax collection.
During an introductory meeting with tax officials at the FBR headquarters, the minister deliberated on a range of proposals, a key one being the inclusion of retailers’ and wholesalers’ incomes in the tax net.
Mr Aurangzeb apprised the FBR officials of his top priority plan hovering around two pillars — documentation of the economy and end-to-end digitalisation of the tax system.
The second review of the $3bn Stand-By Arrangement (SBA) with the International Monetary Fund (IMF) is scheduled from March 14-18. The minister’s visit to FBR occurred before the start of his first meeting with the fund.
Prioritises documentation of economy for boosting collection
According to the finance ministry, Pakistan has met all structural benchmarks, qualitative performance criteria and indicative targets for the successful completion of the IMF review. This would be the final review and a Staff-Level Agreement (SLA) is expected after this appraisal.
Once the SLA is reached, the final tranche of $1.1bn will be disbursed, following the approval of the executive board of IMF.
FBR Chairman Zubair Tiwana briefed the finance minister on the revenue collection performance in the past eight months, proposed measures on the digitalisation of the tax system and proposed a scheme for retailers, wholesalers and professionals.
An official announcement said that the minister discussed with FBR board members revenue performance and future initiatives. These initiatives would focus on enhancing tax collection through improved FBR governance, comprehensive documentation of the economy, and full-scale digitalisation.
The government is considering strategies to broaden the tax base by incorporating wholesale, retail, real estate, and agriculture sectors into the tax framework.
The minister was informed that the federal cabinet has already approved a simplified scheme on Jan 30 for taxing the indicative incomes of traders, retailers and specified persons to raise an additional revenue of Rs400bn to Rs500bn.
The criteria for estimating the indicative incomes of traders will encompass factors such as the location, value and rent of the shops. A specialised mobile application named ‘Tajir Dost’ has been developed to compute income and tax. Authorities believe this app will help streamline the income calculation process. The online retail business will also be brought under the ambit of the scheme.
Taxes under this scheme can be paid in 12 monthly instalments.
At the same time, the minister was informed that a comprehensive proposal for a digital and technology-driven tax body that uses big data has also been approved. This reform requires substantial financial resources to build the necessary infrastructure and obtain specialised software.
The proposed digitalisation project anticipates a strong outcome from these digital and administrative reforms, which seek to enhance tax collection to Rs31.72 trillion by FY27, a huge increase from Rs7.16tr in FY24. According to forecasts, the tax share in GDP will expand significantly, reaching 20pc by FY27, up from 8.5pc.
Many tax officials who attended the meeting felt the new minister to be more professional, focusing on taking action to raise taxes rather than playing the blame game, unlike his predecessor.
“We think the first meeting went well with the new minister, who is more professional,” a tax official who attended the meeting told Dawn.
Mr Aurangzeb said implementing digital solutions was pivotal to modernising the tax administration. “By leveraging technology and enhancing transparency, we can build a more equitable tax system that fosters economic growth and benefits all citizens,” the minister remarked.
Published in Dawn, March 14th, 2024