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Taxes
are imposed by the Government not only as a means of collecting
revenue, but also as a tool for fiscal policy. The
implementation of this policy makes the tax calculations very
complicated and tax rules highly complex. That is why the noted
physicist Albert Einstein has said that “the hardest thing in
the world to understand is the income tax.” The inherent
complexity alongwith a detest for taxes has given rise to
immense amount of litigation in the field. This results into
lengthy court procedures, and long stuck up tax demands. With
this end in view, the reformation of litigation process and an
end to frivolous litigation has been one of the ends of the
ongoing tax reforms. In order to achieve this end, as a part of
functional specialization, a separate legal division has been
created in every reform unit.
The
Large Taxpayers Unit, Karachi, is the pioneer reform unit in the
country which has now completed eight years of its existence.
During these eight years it has played an active role in the
simplifying and streamlining the tax matters. It has been
through the efforts and input from this Unit that tax laws
catering to different sectors have been framed. Therefore it
can be safely said that Large Taxpayers Unit, Karachi has played
an active role in the development of statutory law.
Revenue mobilization
is essential for economic stability hence fiscal policy as a tool is used by
federal government to regulate the economy. The policy focuses on government
taxation to finance the expenditure including development component. A sound
fiscal policy and taxation system create an environment of partnership with the
taxpayer (and society at large) to reduce deadweight loss, to help boost
economic growth and provide conducive environment to make decisions to invest,
save and borrow and also with reference to cost of doing business,
competitiveness, foreign direct investment (FDI) and foreign portfolio
investment (FPI).
Moreover, it was the
phenomenal developments in the areas of science, research, innovations and
technology including ICT that led to the commencement of new phase of
globalization particularly in later half of the 1990’s on the one hand and, on
the other hand, ushered in structural changes in economies of developing
countries in general and economy of Pakistan in particular hence a
comprehensive tax system reform was necessitated not only to keep in pace with
these new developments but also to increase the tax base, optimize the volume
of collection of taxes and improve Tax-to- GDP ratio for sustainable growth and
development. Hence, to formulate a reform strategy, interalia, a Task Force on
Reform of Tax Administration in June, 2000 was constituted and a plan of
reform package was conceived mainly with three facets i.e. policy reforms,
administrative reforms and organizational reforms.
It
was this train of reform process that led to launching of Large Tax payers Unit
(LTU), Karachi on 1st July, 2002 as pilot project under Tax Administration
Reform Project (TARP) funded by World Bank.
Pakistan is among the first ones, even amongst SAARC countries, that trod on the
new path of tax reforms. In fact, model of LTU in Pakistan is combination of two
paradigms i.e. Functional Model and Taxpayer Segment Model.
In
Pakistan, prior to reform, organization of CBR was cylindrical one and was not
functional. Its circle system proved highly inefficient particularly in view of
kaleidoscope of new economic scenarios as it was based on idea of “jack of all,
master of none”. Commissioning of LTU, however, signified a sea-change in the
tax system of Pakistan. Following are the main features of the LTU:
-
A
new administrative setup was established that brought Income Tax, Sales Tax and
Federal Excise Duty under one roof.
-
Whole
system was
organized on functional basis as under:
-
A completely different working environment with
air-conditioning system, work stations without bell and with
conspicuous absence of army of naib-qasids.
-
Equipped with computers and LAN, adequate stationary and other
supporting paraphernalia, now, LTU is being connected through
Wide Area Network (WAN) with head quarter, Islamabad.
-
100% basic salary allowance on selection through IJP.
Initially jurisdiction of 292 Income Tax and 300 Sales Tax
taxpayers were assigned to LTU, nevertheless, that number has
by now increased to 761 taxpayers of Income Tax and 385
taxpayers of Sales Tax and Federal Excise Duty. Further, the
jurisdiction over director of companies assessed in LTU in
case of Income Tax has also been assigned to this unit.
Following pie chart shows sectoral breakup of the existing
taxpayers:
Although, this reform unit has scored relatively high performance results and
has earned multifaceted appreciation from various stakeholders, however, lot
requires still to be done. Logistic support is disproportionate to the workload
and requirements for the swift disposal of the assignments. Paperless office is
yet to be established. Functional and sectoral training is to be made a
continuous and ongoing process. On the other hand, there is room for improvement
particularly with reference to facilitation, awareness and education of taxpayer
and development of culture of mutual learning and partnership through joint
discussions and seminars etc involving taxpayer, tax advisor and tax staff.
We believe that with
all these efforts, and with team spirit this Unit would continue to play its
positive role towards the achievement of its objectives, that is creating of
awareness and confidence in the taxpayers for making proper declaration of
incomes.
Looking
to the track record, it could safely be said that large taxpayers unit, Karachi
will unremittingly and relentlessly keep improving upon itself and will
continue to command the taxpayers confidence and admiration. |
