KARACHI: Association of Chartered Certified Accountants (ACCA) Pakistan has urged the Federal Board of Revenue (FBR) to bring the immovable property values in line with fair market values to discourage under-valued asset declarations.
In its tax proposals for budget 2019/2020, the association said that there is a general tendency to undervalue assets leading to tax avoidance.
FBR’s own valuation tables are below market values and leads to legal ambiguities.
To curb this, FBR can form desks to declare formalized asset valuations in line with the fair market values or a policy on similar lines can be introduced by the government to discourage under-valued asset declarations.
The association suggested measures for broadening of tax base and stated that out of 220 million population in Pakistan, only 0.66 percent (1.45 million) filed their income tax returns before the ongoing filing period.
“Of these, 44.13 percent (640,000/1.45 million) didn’t pay any tax and just filed NIL returns,” it said, adding that people even prefer to pay the higher non-filer tax rates yet stay out of the FBR’s tax net.
These are a serious concern as without broadening the tax base, the existing small taxpayer base for direct taxation can only bear the continually increasing burden of taxation to an extent with serious ramifications for business competitiveness.
Reduction in tax rates to single digits while focusing on broadening the tax base making the cost of tax avoidance along-with the penalties non-attractive. This, coupled with structural reforms can assist in expanding the tax base. These measures will be more effective collectively.
The ACCA said that in order to reduce the reliance on indirect taxes which normally lead to inflation, uncompetitive businesses on a global stage and a reduction in real GDP growth.
It said that Pakistan had one of the highest rates of the indirect taxes in the region. The high cost of taxation contributes to a culture of tax evasion where a few have to bear a heavy taxation burden.
It suggested that NADRA database should be integrated with to identify the individuals living beyond their declared means and to bring them under the tax net.
Further, the withholding taxes data can be analyzed to focus on non-filers paying higher rates of withholding taxes and to bring them under the formal tax net considering the amount of taxes already deduced from them.
The association said that FBR should have integrated access to the databases of other authorities or at least be able to get information to utilize for identifying high net worth and otherwise taxable individuals and entities to bring them under the tax net.
It said that All CNIC should be automatically deemed as the NTN and the requirement of all with taxable income to file Income Tax Returns must be enforced
While it was declared that CNIC would be the NTN, there have still been many issues pending. With an extensive database such as the NADRA’s CNIC records which is also a necessity for businesses and most of the working class, it should be utilized intelligently along with the use of other measures and databases to expand the tax base.