ISLAMABAD: The government on Sunday directed the Federal Board of Revenue (FBR) to prepare a comprehensive plan for increasing direct taxes in the next finance bill.

The directive was conveyed to the FBR by Finance Minister Ishaq Dar during a meeting held in the finance ministry. The meeting was attended by FBR chairman Nisar Mohammad Khan and other senior officials of the board and the finance ministry.

According to a spokesperson for the ministry, the minister gave several directives to the FBR team. “The finance minister directed the FBR chairman to prepare a comprehensive plan that may be implemented through the next finance bill,” he said.

The spokesperson said Mr Dar reviewed measures taken by the FBR for increasing the direct collection of taxes.

The FBR chairman briefed the minister on different models adopted by some countries to increase the direct collection of taxes.

He and his team presented different models of direct tax collection along with the necessary framework to generate more revenue.

The finance minister instructed the FBR to take all measures that would facilitate the voluntary taxpayers/filers.

The minister was quoted as saying: “There should be a clear distinction between filers and non-filers.”

He asked the FBR team to present its proposals in the next meeting.

Talking to Dawn, the spokesperson said different models were discussed to expand the tax net, including an Indonesian model. “As the Indonesian model is close to our tax system, it was thoroughly reviewed,” he said.

He said the meeting was part of the government’s efforts to raise revenue collection and attract more and more taxpayers in the next finance bill. “Although the finance bill will be announced after six months, the government has already started making preparations,” he added.

According to the Economic Survey 2015-2016, Pakistan’s tax structure is highly dependent on indirect taxes.

However, on account of various tax reforms, the proportion of direct taxes has risen steadily. Indirect taxes, which accounted for 68.5 per cent of the total taxes collected by the FBR in financial year 2006, came down to 60pc in 2015.

On the other hand, direct taxes increased from 32pc in 2006 to 40pc in 2015.

For the current fiscal year, direct taxes were expected to increase to 43.4pc and indirect taxes to decline to 56.6pc of total FBR collection.

The share of sales tax increased to 42pc of total collection in 2015 from 41.3pc witnessed in 2006. It is expected to fall to 40.3pc of the total during the current fiscal year.

As a percentage of indirect taxes, it increased from 60.3pc in financial year 2006 to 69.9pc during fiscal year 2015. Sales tax as a percentage of indirect tax is expected to reach 71.2pc of indirect taxes during the current fiscal year.

Published in Dawn December 26th, 2016