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KPRA struggling hard to expand tax net

KPRA struggling hard to expand tax net

PESHAWAR: KPRA has been struggling hard to entrench strong tax culture and optimally widen tax coverage in the province.

Khyber Pakhtunkhwa Revenue Authority was established during 2013 to administer and collect sales tax on services in the province of Khyber Pakhtunkhwa.

The financial year 2018-19 however, posed many challenges. On taking suo-moto action, the Supreme Court suspended the collection and payment of sales tax on cellular telecom services. Resultantly, KPRA could not receive Rs 2.83 billion from telecom companies.

Despite this unanticipated hit during 2018-19, KPRA collected Rs 10.584 billion as against Rs 10.91 billion collected last year. This much of revenue collection could not be possible without the visionary leadership of KP Minister Finance and Finance Department for introducing reforms and strong accountability apparatus in the leading tax organization of the province.

Guided by its leadership, KPRA moved more strategically with better enforcement and declaration-specific internal audit efforts to mine out additional revenue from non-telecom sectors. KPRA’s extra efforts on this account brought 43% growth in the tax collections from non-telecom regimes.

Last year telecom contributed 48% in the aggregate collections but this year its contribution remained only 23%. Similarly, last year non-telecom sectors contributed 52% but this year their contribution increased from 52% to 77%. During 2018-19, telecom contributed only Rs 2.453 billion as against Rs 5.287 billion contributed last year indicating shortfall of 54%. Receipts from withholding tax regime remained at Rs 1.538 billion as against Rs 1.120 billion last year showing an increase of Rs 424.27 million registering an historical increase of 38%. Services from oil and gas sector contributed Rs 1.438 billion, while all other services yielded Rs 5.15 billion.

In the budget 2019-20, KPRA has taken drastic measures to revamp its taxable schedule and rationalize tax rates. Instead of taxing individual services, tax coverage has been linked to 46 classes of services.

While telecom services are chargeable to tax at the rate of 19.5 % and standard rate of tax for all non-telecom services is 15%, tax rate on 13 services has been reduced from standard 15% to four different reduced tax slabs ranging from 2% to 10% and some of the sub-classes of eight services have been given tax relief by applying multiple tax rates.

It is understood that such pro-business tax policy in a province which has already suffered due to war against terrorism, will not only promote tax compliance and economic documentation, it will also attract new investments in the province creating new employment opportunities and raising the average standard of living.

In the new financial year, KPRA is opening its new satellite offices in major urban areas of the province expanding its physical outreach and increasing the overall tax base through taxpayers’ education and facilitation. Necessary human and other resources are being mobilized for this purpose. With the accelerated physical expansion coupled with well-planned rigorous enforcement and audit measures, KPRA will ensure further higher growth in tax collections from non-telecom services.

Keeping in view all the aforesaid measures, KPRA is quite optimistic that it will achieve its new financial year’s target of Rs 20 billion.