ISLAMABAD: Finance Minister Shaukat Tarin on Friday warned all businesses that are not registered taxpayers that the government would soon start sending them details of what they owed.

“Start paying taxes, before we reach you,” he said, adding that only three million tax returns were being filed in a country with a population of 220 million. “This is not right and I assure you that this will start changing.”

He made these remarks at the launch of the new National Sales Tax Return (NSTR) system, which will enable taxpaying businesses to file a single monthly sales tax return rather than filing multiple entries on multiple platforms.

Mr Tarin said that due to the fragmented nature of sales tax collection, taxpayers were required to file separate returns every month with each of the different collection authorities. “For example, a telecommunication service provider operating throughout Pakistan has to file returns every month to FBR, Sindh Revenue Board, Punjab Revenue Authority, Khyber Pakhtunkhwa Reve­nue Authority, Balochistan Revenue Authority, AJK Council Board of Revenue and Gilgit-Baltistan Revenue Authority,” he explained.

This new system, he said, would help significantly reduce the time and cost of compliance, helping to achieve maximum efficiency. According to him, the system would be intelligent enough to sift and consolidate the revenues from a single taxpayer and distribute the among multiple revenue agencies their respective shares.

New integrated sales tax platform to serve as ‘one window’, eliminating the need to file separate returns

According to Federal Board of Revenue (FBR) Chairman Ashfaq Ahmed, the new system is based on the existing IRIS platform, which already has several built-in functionalities. The new system is also linked with POS transactions as well as Track & Trace. All these measures, he said, would not only contribute to broadening the tax base but also promote ease of doing business.

He said the system would act as a single repository for all domestic transactions and invoice management, automatically apportioning input tax, preparing the return and working out the tax payable to each of the authorities Mr Ahmed revealed that FBR was moving fast towards developing a similar National Income Tax Returns system in order to facilitate taxpayers and maximise tax compliance.

The minister said that the new sales tax regime, introduced in the Finance Supplementary Bill 2021, and the new data repository developed by FBR in collaboration with the National Database and Registration Authority (Nadra), were a big leap forward towards documenting the economy.

This was also one of the key recommendations of international agencies such as the World Bank, he said, adding that this system encourages the harmonisation of tax procedures, definitions and principles between the federal government and the provinces.

In his ultimatum to businesses that were not registered with FBR, Mr Tarin said the board would now use technology to reach all those who are liable to pay taxes. “We will reach out to unregistered persons in the next few weeks with details of their assets and the payment due on those assets,” the minister said.

He said FBR would no longer be issuing notices for tax collection. Instead, Mr Tarin added, with the data at its disposal, they would “connect potential persons with a panel of auditors from the private sector for consultation if they believe there is some error [in the details provided to them].”

However, if someone still did not pay taxes, he said “the law will take its own course”.

The minister assured taxpayers that there would be no harassment by tax officials, saying that the government would deal with unregistered taxpayers “on the basis of concrete data and not assumptions”.

“I promise you that if I stay in this position, all persons will not just have to pay income tax but also sales tax, because it is the need of this country.”

The minister explained that the tax-to-GDP ratio in Pakistan was around 10pc while expenditures added up to 12-13pc of the GDP. “We have to take loans to pay off our current expenditure and take more loans for other development initiatives,” he said, adding that “this cannot work”.

“The tradition of ducking tax payments will have to end… [first] start paying taxes and [then] hold us accountable... you do your work and we will do our work,” the minister remarked.

Talking about the Finance (Supplementary) Bill 2021, the minister said the withdrawal of tax exemptions was not aimed at increasing tax collection but at ensuring documentation.

Published in Dawn, January 8th, 2022