A high-level meeting, chaired by Prime Minister Shehbaz Sharif on Monday, reviewed progress on the digitization of the FBR including the implementation of an Artificial Intelligence (AI)-based assessment system, digital invoicing, simplified tax returns, establishment of FBR command and control unit and cargo tracking.
In a key step toward tax reform, the Federal Board of Revenue (FBR) will begin accepting simplified digital tax returns from salaried individuals starting July 15, aiming to streamline compliance and encourage broader participation in the tax net.
There is no doubt that implementation of these reforms in letter and spirit has the potential not only to bring about a meaningful increase in tax collection but also facilitate the tax-payers, minimize personal contacts and introduce greater transparency in the system. The announcement about availability of a new digital form for salaried individuals is a welcome development as it is stated to be concise, user friendly and available in Urdu as well, making it comprehendible for all users. In fact, in the past as well, tax returns both for the salaried class and others were reviewed frequently with the stated objective of making them simplified but every revision added new dimensions, requiring submission of voluminous information from the tax-payers. Salaried is the most compliant class of tax-payers as their due tax is invariably deducted at source and therefore, the requirement to file income tax by them is superfluous in case they have no other source of income. In the past, they were exempted from filing of return and were required only to provide to the FBR a copy of the tax-deduction certificate issued by their employers and the same practice needs to be revived if the real intention of the Government is facilitation of the salaried class. Availability of the tax return in Urdu language will obviate the need for many filers to seek assistance from others including professional entities at a cost including the possibility of leakage of their confidential information/data to unscrupulous elements and that too in this age of increasing cyber crimes.
The meeting was informed that under the AI based assessment system, traders are now allowed to submit advance goods declarations before the arrival of ships. Under this, they will get full exemption on upfront duties and taxes. With this system, the percentage of advance goods declarations is expected to rise from 3% to over 95%. This will also allow containers with advance declarations to be delivered directly from the port to factories. As for digital invoicing, now all businesses, both large and small, will be required to issue receipts at the time of sale through the FBR’s online system. Around 20,000 businesses are expected to join this system in the coming months. In just one month, 8,000 invoices amounting to 11.6 billion rupees were issued through this system. Proper implementation of the system will ensure ease both for tax-payers and taxmen as there will be no need to submit sales tax returns separately, as all transactions will be automatically recorded in the system. Additionally, the internationally recognized 8-digit HS Code will help eliminate fake and flying invoices. Introduction of cargo tracking system and e-bilty system will allow real-time monitoring of the movement of goods and tax payment tracking. In his remarks, the Prime Minister declared that expanding the tax base and easing the burden on low-income citizens were among the Government’s top priority. There is no doubt that the Government is striving hard and rightly so to increase tax collection significantly as part of the strategy to reduce crippling dependence on foreign loans. However, with the exception of the downward revision in income tax rates for salaried class, the Government seems to have no worthwhile plan to realize the cherished objective of minimizing tax burden on lower strata of society that deserves relief because of continuous rise in the cost of living.
