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Pakistan beats India in direct tax collection

Pakistan beats India in direct tax collection

ISLAMABAD: A comparison of direct tax collection of Pakistan and India shows that the FBR observed a growth of 44.1pc in July to September 2013 as compared to Indian tax authorities’ performance that witnessed 12.5 per cent increase in direct taxes collection during the same period.

The experts explained that in Pakistan, Rs101.840 billion were collected under the head of direct taxes during the corresponding period against Rs70.674 billion in the same period last fiscal, reflecting an increase of 44.1 per cent.

While, net direct tax collection of India for the current fiscal year, till September 17, remained Rs238,325 crore against Rs2,11,641 crore in the same period of last year with an increase of 12.5 per cent. The corporate tax collection stood Rs146,610 crore against Rs135,791 crore collected in 2012-13, showing a growth of 7.97 per cent.

According to the experts, the comparison of Pakistan and India shows that the FBR has witnessed 31.6 per cent higher growth in net direct taxes collection as compared to the Indian tax department during the period under review.

The experts, referring to the recently issued 87th report on “Tax Administration’s relating to the Ministry of Finance India,” said that the Parliament Tax Committee Report talks about new reform measures to improve direct taxes collection in India.

The gist of some of the more important Recommendations contained in Parliament Tax Committee Reports are as under:

Firstly, re-orienting the efforts for widening of tax base by bringing in potential and high net-worth assessees into the tax net stressed. The committee has noted that though the total direct tax collections have registered an increase in the preceding six years i.e. from Rs 2,30,181 crore in 2006-07 to Rs 494,799 crore in 2011-12, the tax-GDP ratio has decreased from 6.26 per cent in 2007- 08 to 5.59 per cent in 2011-12. As a result, the tax buoyancy, which is a key indicator of efficiency of revenue mobilisation in relation to growth in GDP, has decreased during these years and during the financial year 2011-12, it is only 0.70 (less than one). As the revenue realised is nowhere near the revenue potential of the country and much remains to be done to improve the horizontal equity of the tax system by extending the tax net to hard to tax groups, the Committee have recommended that the Department of Revenue should re-orient their efforts for widening the tax base by bringing in the potential and high net worth assessees into the tax net from specific sectors/channels/categories responsible for tax evasion. A concerted action plan both for widening tax net through innovative means and targeting high net worth assessees should be evolved. The report said that various tax exemptions and concessions extended under the Tax Law have depleted considerable portion of tax collection which is borne out by the fact that the revenue foregone on account of tax exemptions has increased by 22.75 per cent from Rs 77,177 crore in 2006-07 to Rs 94,738 crore in 2010-11 and corporate sector alone accounted for 63.5 per cent of revenue foregone in 2010-11. For the years 2011-12 and 2012-13 revenue foregone in respect of corporate income tax increased to Rs 67,995 crore in 2012-13 while the same for personal income tax has increased to Rs 45,480.1 crore in 2012-13. The committee has desired to be informed about the extent to which these exemptions are contributing to improvement in the savings-investment ratio as spurt to the economic growth process. Further, the committee has called upon the Government to consider some interim measures to phase out unwarranted tax exemptions/deductions.

The parliament committee has urged the government to undertake a focused study to augment the number of new assesses so that the tax base remains wide and dispersed, reflecting truly the increase in per capita income as also the diversified nature of our economy. The Ministry has been asked to devise an analytical model for widening of tax base, based on the increase in per capita income, both in nominal and real terms.

Indian Committee has further observed that out of total 8.5 lakh scrutiny assessment cases for disposal, the Department had disposed of only 4.6 lakh (53.7 per cent) cases in 2010-11. Further, with regard to disposal of summary assessment cases, the committee find that out of 5.2 crore summary assessment cases for disposal, the Department had disposed of 3.1 crore cases only in 2010-11. The committee was further constrained to find that the targets of cases to be disposed of had also not been changed for the years 2008-09 to 2010-11. The Committee have desired to be apprised about the current position with regard to disposal of time barred cases as well as achievement of target as stipulated in Central Action Plan for disposal of scrutiny/summary assessment cases. The Committee has strongly expressed the urgency for increasing the number of Assessing Officers for this purpose, by simultaneously enhancing the disposal target for each assessing officer, which should be finalized and completed within a stipulated timeframe.

Upon noticing that the steps taken by the Department have not been effective in tackling the backlog of such claims together with consequent heavy interest burden, the Committee have desired that in addition to these steps the Department should fix targets in respect of each charge for quick disposal of refund cases and fix responsibility on those officials who fail to fulfil the same. Simultaneously, a special Cell may also be set up in the Department to ensure that refund claims once received are positively settled within the prescribed time limit thereby reducing the interest burden thereon, it said.

The committee has observed that the Assessing Officers function as quasi judicial authority and whose independence and autonomy must not be interfered with. Nonetheless it is obligation of supervisory officers to ensure that there is no miscarriage of justice. Owing to the fact that over a period of time dissatisfaction level of assessees have gone up substantially because a high percentage of appeals are being preferred against the initial assessment order and substantial percentage of appeals preferred by assessees also succeeded, the Committee have desired that the Department seriously examine and inculcate attitude which will ensure that while no legitimate revenue is failed to be realised, the orders of Assessing Officers are fair and judicious and do not result in a very high percentage of dissatisfaction on the part of the assesses, the report added.