KARACHI: The manual collection of taxes will be eliminated by January 2021 and in this regard Federal Board of Revenue (FBR) and State Bank of Pakistan (SBP) have agreed on the timelines.
The central bank in a report said that the timelines were agreed with FBR to gradually eliminate the manual tax collections by January 2021.
“As a first step in this direction, the option of manual tax payment by corporate sector was eliminated from August 2020,” the SBP said.
During 2019/2020, the SBP intensified efforts to digitize government receipts and payments. In order to bring the cost of digital tax payments and manual paper based tax payment, the nominal fee on digital payment of taxes on the tax payers was eliminated which would be absorbed by SBP.
As the fee is nominal as compared to the agency commission, the SBP pays to agent banks for traditional paper based tax collection, the absorption of digital tax payment fee by SBP, will in fact reduce the net cost of tax collections for SBP.
Further, in a significant development in this respect, timelines were agreed with FBR to gradually eliminate the manual tax collections by January 2021. As a first step in this direction, the option of manual tax payment by corporate sector was eliminated from August 2020.
The SBP said that the Alternate Delivery Channels (ADC) system for collection of government taxes is functioning and robustly for different agencies of the federal government and Government of Punjab.
The taxpayers pay their taxes through internet banking, mobile banking, ATMs and Over-the-Counters (OTC) facility of branches of commercial banks across the country.
“Since its launch in March 2018, an aggregate amount of Rs.829 billion of government taxes and duties has been collected.”
In order to promote digital payments of government taxes and duties, SBP with effect from January 1, 2020, eliminated the transaction fee for taxpayers using digital modes for payment of duties and taxes of federal and provincial governments.
Further, to utilize the potential of ADCs system fully, SBP and FBR have agreed to gradually replace the manual payments of FBR’s taxes with the ADCs system starting with corporate taxpayers from first quarter (July – September) of 2020/2021.
Accordingly, payments of FBR’s Taxes by AOPs/Partnerships and individuals will be shifted completely on the ADCs in the Second Quarter and Third Quarter of 2020/2021 respectively.
Similarly, SBP is negotiating with other provincial governments to use this facility for their taxpayers and utilize the umbrella of ADCs for collection of their taxes and levies. Recently, SBP, M/s 1Link and Islamabad Capital Territory Administration (ICTA) have executed a tripartite agreement for extension of ADC system for collection of ICTA taxes and duties.
While negotiation with Finance Department, Khyber Pakhtunkhwa are at advance stage for initiation of online collections, negotiation with other provincial governments will be initiated in FY21. The project will be broadly based on the model already implemented for FBR and Government of Punjab.
After digitization and automation of Person to Government (P2G) payments, SBP and GoP are now working on digitization of Government to Person (G2P) payments.
As a part of G2P digital payments, SBP and Pakistan Customs are working on digitization of Duty Drawbacks refunds to business in the first phase. After digitization of this process, Customs will generate and deliver a message to SBP for payment of refunds directly into the exporter’s bank account upon realization of foreign exchange proceeds of export consignment.
The successful implementation of this project will be a milestone towards digitization of G2P payments and will help in the government’s initiatives for ease in doing business.