PkRevenue.com – The Institute of Chartered Accountants of Pakistan (ICAP) has recommended that the tax authorities reactivate the Directorate of Broadening of Tax Base (BTB) to enhance the country’s tax revenue.
In its proposals for the upcoming 2024-25 budget, ICAP highlighted that although the Directorate General of BTB was established under Section 230D of the Income Tax Ordinance, 2001, it has not been fully operationalized.
ICAP’s proposal suggests that one of the ways to reactivate the BTB Directorate is by outsourcing its investigative activities to expert agencies and organizations within Pakistan. The Federal Board of Revenue (FBR) should invite and review proposals from various entities interested in undertaking these outsourced functions. These organizations would assist in identifying new taxpayers who are required to file tax returns but have not done so, thereby expanding the tax base.
According to ICAP, these expert agencies or organizations could be incentivized with sufficient remuneration based on their success in identifying and collecting taxes from new taxpayers. This approach aims to boost the FBR’s revenue without incurring additional fixed administrative costs, which could otherwise burden the exchequer.
ICAP emphasized that the current FBR workforce is overwhelmed with existing responsibilities, making it challenging to focus on expanding the tax base. Outsourcing this function would alleviate some of this burden and facilitate the identification of new taxpayers, thereby increasing tax collections.
The ICAP also recommended that the Directorate General of BTB should collect and analyze data from various authorities. There is a significant amount of financial and non-financial data available with different revenue and government bodies at both national and provincial levels. This data, which includes information filed by banks regarding withholding tax, cash withdrawals above a specified limit, and credit card transactions, could be crucial in broadening the tax base.
ICAP outlined several modes to identify non-filers, including:
• Utilizing withholding tax data available with the FBR to expand the taxpayer base.
• Accessing mobile users’ withholding tax data.
• Reviewing withholding data from electricity bills.
• Examining bank account holders’ withholding tax data related to imports, exports, and profit payments.
• Scrutinizing property registration data, including the construction of buildings.
• Analyzing vehicle registration data.
To empower the Directorate General of BTB, ICAP suggested that the FBR should implement a proper mechanism for assessing non-filers using data obtained from various sources. This mechanism should include:
• Establishing criteria for assessing non-filers.
• Conducting provisional assessments of non-filers.
• Referring cases to the relevant Commissioner.
• Providing non-filers with an opportunity to be heard and to furnish the required information.
• Conducting best assessments of non-filers based on available information.
• Enforcing compulsory National Tax Numbers (NTN) for non-filers under Section 114 of the Income Tax Ordinance, 2001, if the criteria are met.
By taking these steps, ICAP believes that the FBR can significantly increase its tax revenues and broaden the tax base without adding undue pressure on its existing resources. The reactivation and proper functioning of the BTB Directorate are seen as crucial measures to achieve these goals and improve Pakistan’s fiscal health.
