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  #11  
Old Saturday, August 01, 2009
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Default Merger of Sales Tax and Income Tax ... a utopian scheme in the making

Merger of Sales Tax and Income Tax ... a utopian scheme in the making (The Nation Feb 8, 2009)


Federal Board of Revenue (FBR) has recently announced creation of a new post of Member Internal Revenue Service and abolishment of the post of Member Sales Tax. The new Member IRS shall deal with both Income Tax and Sales Tax and hence Sales Tax and Income Tax have effectively been merged. It has been propagated that the same has been done under the pressure from multi-lateral donor agencies. However this hasty step of the FBR appears to have far reaching consequences in terms of its legal, administrative and financial implications and it seems that the Board has not bothered to consider these ramifications at a time when country is already facing financial crisis.
First of all, the decision appears to be based on an IMF working paper and study conducted in 2004 for middle-eastern and north-African countries. The study itself claims in its preamble not to be representative of IMF views and IMF has recently started advocating ‘Best Fit Model’ rather than ‘International Best Practices’ model realising that each country has its own peculiar circumstances and it is not appropriate to import and copy paste foreign models in host countries. Interestingly the decision makers in the FBR failed or did not bother to look around the local models like India, Bangladesh or Malaysia where indirect taxes are administered by one agency and the direct taxes by the other. Even in the United States the IRS (FBR has been quick to copy the name) does not administers the sales tax that is actually a state subject. United Kingdom has tried to do this experiment but without any success.
So why is merger necessary? The proponents’ claim that merging the domestic taxes facilitates the tax payer as the tax payer has to come to one office for his taxes and functions like audit, registration and enforcement can be unified. It is interesting to note that while sales tax has some 80,000 registered persons, Income Tax has some 2 million registered tax payers so even if we accept the argument of facilitation, it would be to the extent of only the overlapping 80,000 tax payers.
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  #12  
Old Monday, August 03, 2009
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Default Pakistan Revenue Service

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  #13  
Old Tuesday, August 04, 2009
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Default Govt reverses World Bank tax reforms project

ISLAMABAD: (Dawn 01 July,2009)

The PPP-led coalition government on Tuesday reversed the Seven-year old World Bank-funded project to reform tax administration owing to persistent pressure from the customs and excise group causing millions of rupees cost to the national kitty.

The reforms, initiated by the previous government in the year 2002, were focused on the functional merger of the sales tax, federal excise with the income tax. The agreement reached with the World Bank for the reform process to be carried out with a loan worth $150 million.

Ironically, the tax groups, income tax and customs, implemented those reforms initiatives immediately, which only benefited their lifestyles like doubling of salaries, purchases of new cars and establishing new buildings with new furniture.

The World Bank also proposed to reduce the number of members’ posts (BPS-21) at Federal Board of Revenue (FBR) to five and further rightsizing in the tax administration. But the government also reversed this decision by increasing the number of members to 12 instead of five.

These major decisions happened in the wake of the agitation started by the customs group against the merger of sales tax with income tax when the former chairman FBR Ahmad Waqar issued a notification for establishing the Inland Revenue and Customs, as separate group.

The customs and excise group filed a petition in the Islamabad High Court against the intended merger of sales tax and federal excise with the income tax on the plea that both taxes are different in procedure, collection, laws and regulations from the income tax.

The High Court granted stay order and directed the FBR for not making any change in the status quo till further order.

The agitating customs group was of the opinion that there was no such plan under the original reforms documents for the physical integration of sales tax with income tax but only the proposal was for functional integration of the taxes. The customs group also termed the merger as against the constitution.

The government spent millions of dollars on increasing the revenue-to-GDP ratio. The tax-to-GDP ration rather decreased to 9.6 per cent this year from 12 per cent before the start of the reforms process.

The reforms process was focused on three features, integrated tax management system, common taxpayers identifiers and common data warehouse, which did not happen despite spending millions of rupees on consultants and studies.

The government has also not undertaken any audit of those people who are responsible for causing millions of rupees loss to the kitty for not carrying out the policy reforms.

Under the new set up a major lacuna would still remain as FBR appointed Member Domestic Operation, South, Muhammad Ramzan from customs group, while posted Aziz Ahmad Bilour of income tax group as Member Domestic Operation North.

They will supervise the operations of all taxes—income tax, sales tax, federal excise duty in their respective zones, North and South. However, the customs operation will be managed only by the customs group.

At the same time, FBR posted Khalid Aziz Banth as Member Policy direct taxes and Mehmood Alam as Member Policy indirect taxes (customs, sales tax and federal excise).

On the policy side, the government separated the taxation system into direct and indirect taxes while on the operational side it created two zones by integrating the functions of sales tax, federal excise with income tax.

Analysts said this ill planning of the government would again create the clash of interest between the two tax groups as the gulf between the two taxes had already widened over the interpretation of the reform process. Who will be answerable to whom under the operational side integration?

According to the notification, the government appointed Ihsanul Haq as Member facilitation and taxpayers education; Zafar ul Majeed, Member strategic planning and statistics; Hafiz Muhammad Anees as Member taxpayer audit.

Munir Qureshi has been posted as Member operations (customs). He shall also hold the additional charge of the post of Member policy customs. Ch. Muhammad Azam posted as Member administration and human resource, Muhammd Saeed Khan, director general special initiatives, and Shahid Azam Khan Member enforcement and accounting.
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  #14  
Old Wednesday, August 05, 2009
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Default Bravo Sir!

Dear Shoaib,

Thank you so much for keeping us updated with the latest developments. we find your posts highly informative. You have kept this thread alive with your regular inputs. The CEGians are highly oblidged by your analytical contributions. Bravo Sir!

Regards & Blessings
Amjad Aman
CEG 37th Common
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  #15  
Old Wednesday, August 05, 2009
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Default Stp

No one is replying on STP thread so may i ask what salary, accomodation etc is given during STP of CEG. And the place where STP takes place.
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  #16  
Old Wednesday, August 05, 2009
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Default @Amjad Aman

AOA

Hope you would be enjoying good time. Thanks for your comments. I am trying to motivating my CEG fellows, and I hope you people will follow the suit.It's my pleasure and you are most welcome.
Plz do contact me. shoaibr14@hotmail.com. If you use msn messenger then add me there. Mail me your contact number.

Thanks a lot again
take care Allah Hafiz
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  #17  
Old Saturday, August 08, 2009
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Default

Dear Shoaib,

I have added your ID on MSN and sent an email message. Albeit, I find a little time on the net; I shall always be looking forward to the latest updates on this thred.

Regards,
Amjad Aman
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  #18  
Old Monday, August 10, 2009
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Default @amjad

Salaam Sir Thanks a lot Sir for your response. Hope you will contribute with your efforts to CEGians. Take care Allah Hafiz
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