Creation of IRS, changes in tax laws being reviewed: World Bank mission meets FBR officials
SOHAIL SARFRAZ
ISLAMABAD (September 29 2009): A World Bank (WB) review mission on Monday started meetings with the Federal Board of Revenue (FBR) on creation of new Inland Revenue Services (IRS), 2009-10 audit plan, broad-based implementation of the value-added tax (VAT) and legal changes in tax laws to prevent revenue leakage.

Sources told Business Recorder here on Monday that the schedule of the World Bank mission meeting had been kept confidential due to security reasons and prevailing law and order situation. The mission would convene detailed meetings with the tax managers from Sep 28 to October 16 to review Tax Administration Reform Programme (TARP).

The mission members included lead economist Satu Kahkonen, senior financial sector specialist Anjum Ahmed and consultants Carlos Silvani, Orlando Reos, Paulo dos Santos, Wyatt Grant and Daniel Alvarez. The sources said that the World Bank and the FBR would take policy decisions on the VAT implementation at the retail stage.

Two special meetings would be convened from October 14 to 16 to discuss VAT in view of suggestions of Tax Advisory Council, international VAT conference and policy discussions on VAT taking into account the viewpoint of the stakeholders, particularly business community and provinces. The administration of new VAT law at provincial level would be discussed to bring retail sector into the tax net.

Other key issues included composite audit of corporate sector and update on enforcement plan to check exceptional level of non-compliance. Over 54 percent of the registered corporate sector, 76 percent individuals and 83 percent of the Association of Persons (AOPs) are non-filers of returns for the 2008 tax year.

The mission would convene a meeting with the Director General, Human Resource Management (HRM), to review details of new Inland Revenue Service and options for the tax officials to adopt new service group. A draft of the Presidential Ordinance on IRS has already been dispatched to the Cabinet Division for approval.

Meanwhile, Pakistan Customs and Excise Officers Association have filed writ petitions against the creation of IRS with the Lahore High Court, Rawalpindi bench. The sources said that the World Bank officials would meet the FBR Member, Enforcement and Accounting, to have an update on measures to increase revenue collection and implementation of the enforcement plan in the field formations.

The mission would convene meeting with the FBR Member, Legal, to discuss the legal changes related to the FBR organisational structure, harmonisation of taxes and prevention of revenue leakage and improving tax compliance through strict enforcement.

The World Bank would also convene a meeting with the heads and operational wings of the Large Taxpayer Units (LTUs) and Regional Tax Offices (RTOs) to review integration plan in the field formations. The reporting functions at the LTUs would also be discussed under the integrated policy. The head of the TARP and its Programme Manager would brief the mission on the implementation of reforms under new organisational structure. The FBR communication plan, addressing technical and organisational, issues would also come under discussion.

The FBR Member, Taxpayer's Audit, would give detailed briefing to the mission officials on audit selection criterion, strength of auditors and implementation of the annual audit plan (2009-10). According to sources, the Director General and staff of RTO, Rawalpindi, would review progress on audit and enforcement plans. The review of the process envisioned for the adoption of new occupational groups and career streams would also be discussed.

Pakistan Revenue Automation Limited (PRAL), a subsidiary of the FBR, would brief the World Bank on an action plan and progress in various IT areas like expansion of e-filing, plans and progress on data centre, underlying structures and databases being used for IT systems, ie Mahasil, CREST and 'STMS', identification and replacement of duplicate functions and other aspects of IT action plan. The rollout of CREST, a sales tax verification system, would also be discussed during the meeting.

On October 7, the mission would leave for Karachi to meet officials of RTO, Karachi, under new organisational structure and implementation of audit and enforcement plans. The wrap-up meeting would be convened on October 13 at the Ministry of Finance, which would be attended by Minister of Finance Shaukat Tarin, FBR Chairman Sohail Ahmed to discuss the mission's recommendations on the TARP.

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