Friday July 03, 2009
ISLAMABAD: The Federal Board of Revenue (FBR) has admitted that the taxpayers have misused the Universal Self Assessment Scheme (USAS), reflecting serious weakness in the voluntary payment system. According to the FBR latest quarterly review, the misuse of the USAS is evident from the fact that despite increase in number of returns for the last three years, there was 71 percent decrease in the income tax payments made during this period.
Some of the weaknesses in the taxation system need to be addressed immediately. It has been noted that shortfall in direct taxes is mainly due to lesser growth in voluntary payments and withholding taxes. A careful, detailed analysis and monitoring of withholding agents should be envisaged on priority basis. Similarly, it appears that the USAS has been misused by the taxpayers, needs attention through strict audit.
The objectives behind introduction of USAS were primarily to minimise interface between the taxpayer and tax administration, repose confidence in the system and inculcate self-realisation among the taxpayers. The initial years witnessed a success in this system with regard to the voluntary compliance, but during the last couple of years, there has been a poor compliance of taxpayers in this head. The two major factors behind the decline in voluntary payment (VP) are poor tax facilitation and weak audit system. The poor or inappropriate tax facilitation has been the major cause to inculcate self realisation among the taxpayers. Then as a result of weak audit and enforcement, there is little deterrence and check on the taxpayers of the tax authorities.
The overall growth in the VP has been only 9 percent for 2008-2009 as compared to 2007-2008. Further, the comparative analysis of the payments with returns has registered a growth of 65 percent as compared to the previous year. But, surprisingly by comparing the VP collections of 2008-2009 with 2006-07 reveals a different picture, which is quite appalling as it depicts an overall negative growth of 19 percent in VP collection even after two years. The perusal of collection with return when compared with 2006-07 reveals that even in the 2008-09 FBR is still 71 percent deficient of what was collected two years back. In figures the payment with returns was at Rs 47.9 billion during July-March 06-07 to only Rs 14.06 billion during 2008-09, thus yielding a decline of Rs 33.84 billion.
While analysing the growth in the number of returns submitted over the last three years, also does not give us an encouraging figure, thus further pointing towards the weaknesses in the USAS mainly owing to the voluntary payment scheme. The analysis when comparing the returns filed in 2006-07 to 2008-09 reveals an increase of 5.3 percent and 34,079 returns in absolute terms.
The point to ponder is despite the increase in number of returns for the last three years, why there has been a decrease in the payments at 71 percent over three years? One apparent reason is the major decline in the payments received from the corporate sector and secondly the poor check and deterrence through audits, particularly of the corporate entities. The second component of Voluntary Payments ie advance tax has not shown any encouraging growth. As compared to the 2007-08 the growth has been nominal ie only 4 percent, the report added.
(BRecorder)
ISLAMABAD: The Federal Board of Revenue (FBR) has admitted that the taxpayers have misused the Universal Self Assessment Scheme (USAS), reflecting serious weakness in the voluntary payment system. According to the FBR latest quarterly review, the misuse of the USAS is evident from the fact that despite increase in number of returns for the last three years, there was 71 percent decrease in the income tax payments made during this period.
Some of the weaknesses in the taxation system need to be addressed immediately. It has been noted that shortfall in direct taxes is mainly due to lesser growth in voluntary payments and withholding taxes. A careful, detailed analysis and monitoring of withholding agents should be envisaged on priority basis. Similarly, it appears that the USAS has been misused by the taxpayers, needs attention through strict audit.
The objectives behind introduction of USAS were primarily to minimise interface between the taxpayer and tax administration, repose confidence in the system and inculcate self-realisation among the taxpayers. The initial years witnessed a success in this system with regard to the voluntary compliance, but during the last couple of years, there has been a poor compliance of taxpayers in this head. The two major factors behind the decline in voluntary payment (VP) are poor tax facilitation and weak audit system. The poor or inappropriate tax facilitation has been the major cause to inculcate self realisation among the taxpayers. Then as a result of weak audit and enforcement, there is little deterrence and check on the taxpayers of the tax authorities.
The overall growth in the VP has been only 9 percent for 2008-2009 as compared to 2007-2008. Further, the comparative analysis of the payments with returns has registered a growth of 65 percent as compared to the previous year. But, surprisingly by comparing the VP collections of 2008-2009 with 2006-07 reveals a different picture, which is quite appalling as it depicts an overall negative growth of 19 percent in VP collection even after two years. The perusal of collection with return when compared with 2006-07 reveals that even in the 2008-09 FBR is still 71 percent deficient of what was collected two years back. In figures the payment with returns was at Rs 47.9 billion during July-March 06-07 to only Rs 14.06 billion during 2008-09, thus yielding a decline of Rs 33.84 billion.
While analysing the growth in the number of returns submitted over the last three years, also does not give us an encouraging figure, thus further pointing towards the weaknesses in the USAS mainly owing to the voluntary payment scheme. The analysis when comparing the returns filed in 2006-07 to 2008-09 reveals an increase of 5.3 percent and 34,079 returns in absolute terms.
The point to ponder is despite the increase in number of returns for the last three years, why there has been a decrease in the payments at 71 percent over three years? One apparent reason is the major decline in the payments received from the corporate sector and secondly the poor check and deterrence through audits, particularly of the corporate entities. The second component of Voluntary Payments ie advance tax has not shown any encouraging growth. As compared to the 2007-08 the growth has been nominal ie only 4 percent, the report added.
(BRecorder)
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