ISLAMABAD: Federal Board of Revenue (FBR) has been empowered for using third-party information to identify tax dodgers.
The Medium-Term Economic Framework (MTEF), which was launched on Monday by the Finance Minister Asad Umar, the government had promulgated a law so as to allow FBR to access third-party data bases.
The MTEF pointed out building data analytics capacity to utilize available information. “This involves identifying and identifying and pursuing individuals falling outside the tax net through the use of third-party information on consumption patterns utilizing data from income, income tax returns and expenditure data from various sources such as travel, bank account, car ownership, property ownership, children studying abroad, children studying in expensive schools etc.”
Since FBR does not have adequate capacity to utilize these data using latest techniques available, it would be necessary to collaborate with researchers and experts to develop efficient and effective analytical tools.
The government has evolved measures to strengthening tax enforcement and tax audits
The framework said that tax enforcement has remained one of the weakest areas of tax administration.
The government intends to overcome this shortcoming by building enforcement capabilities within FBR through staff training and an intensive use of information technology.
In this regard, priority is being given to putting in place a track-and-trace system and strengthening the risk-based tax audits.
The government also planned harmonizing the tax codes. The MTEF said that the government is well aware that some tax issues (e.g. non-harmonized sales tax rates across tiers of government, taxation of real estate, etc.) adds to the cost of doing business by requiring multiple tax returns to be filed in a single tax year.
While working with the provincial governments in the National Finance Commission (NFC) framework, the federal government intends to harmonize the tax code and integrate tax processes through digitization and process automation.
In addition, it intends to establish a mechanism to fast-track resolution of tax disputes, thus reducing compliance cost.
This will reduce the cost of doing business to some extent and make it harder for taxpayers to play the tax administrations off against each other to evade taxes.
An NFC sub-group has already been tasked with formulating recommendations to simplify payment of taxes to enhance ease of doing business in taxation area.