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Dar asks FBR to prepare robust plan to enhance direct tax collection

Dar asks FBR to prepare robust plan to enhance direct tax collection

ISLAMABAD: Federal Finance Minister Ishaq Dar has reviewed measures taken by the Federal Board of Revenue (FBR) for increasing the direct tax collection and directed the Board to prepare a comprehensive plan that may be implemented through the next Finance Bill.

The finance minister conveyed directives to FBR chairman Nisar Mohammad Khan during a meeting held in the finance ministry, which was also attended by other senior officials of the board and the 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 FBR chairman briefed the minister on different models adopted by some countries to increase the direct collection of taxes. The FBR officials also presented different models of direct tax collection along with the necessary framework to generate more revenue.

Dar also instructed the FBR to take all measures that would facilitate the voluntary taxpayers/filers. “There should be a clear distinction between filers and non-filers,” he said. He asked the FBR team to present its proposals in the next meeting.

During the meeting, the Indonesian model of collecting taxes was discussed to expand the tax net. The spokesman 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.

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 ongoing financial year.