Final Repor ON FBR
100
A Internship Report On Federal Board of Revenue RTO Bahawalpur Department of Commerce `
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Transcript of Final Repor ON FBR
A
Internship Report
On
Federal Board of Revenue
RTO Bahawalpur
Department of Commerce
`
Submitted To:
Sir Muhammad Azhar Sheikh
Prepared by:
Adnan Akram
BS Commerce 6th (Morning)
Roll No: 19
Session: (2011-2015)
E-mail: [email protected]
Contact: +923467564296
Date:22-09-2014
`
`
Acknowledgement:
Primarily and foremost I praise be to Allah the Supreme to give me the courage and patience to
carry out this task successful.. By the grace of Allah I have complete my internship. The special
thank goes to our helpful director Sir Dr .Abdul Majid Makki who gave us opportunity to
conduct Internship on Federal board of Revenue in Islamia University of Bahawalpur. The
direction and support that he gave truly help the sequence and softness of the Internship. The
support is much indeed appreciated.
Person is not a perfect in all the contexts of his life; He has a limited mind and thinking
approaches. It is the guidance from Almighty Allah that shows the man light in the darkness and
the person find his way in the light. Without this helping light, person is nothing but a helpless
creation.
The teaching of the Holy Prophet Muhammad (PBUH) are the continuous source of guidance
for me especially his order of getting knowledge and fulfilling one’s duty honestly was key
motivation force for me.
I am highly thankful to the staff member of Federal Board of Revenue Regional Tax Office
Bahawalpur. Who really cooperated with me and provided me their complete guidance.
My special thanks to Sir Salman Bahoo in charge of internship and placement that
arranged internship and provided me with his kind guidance at each and every step.
`
Table of Contents
Unit No: 1
Main Entrance RTO Bahawalpur:...................................................................................................1
Unit No: 2…………………………................................................................................................2
2. Excutive Summary:.....................................................................................................................3
2.1.1. Vision Statement:...........................................................................................................4
2.1.2. Mission Statement:........................................................................................................4
2.1.3. Values:...........................................................................................................................4
2.2. Federal Board of Revenue........................................................................................................5
2.2.1. Brief History:.................................................................................................................5
2.2.2. Function of FBR/Revenue Division:.............................................................................6
2.2.3. Nature of Organization:.................................................................................................6
2.2.4. Scope and Volume of Federal Board of Revenue:........................................................7
2.2.5. Organogram of Federal Board of Revenue:....................................................................8
2.3 Management of Organization:...................................................................................................8
2.3.1 Finance Secretaries/ Ex-officio Chairman, FBR:...........................................................8
2.3.2 Secretary General Revenue Division/ Chairman CBR, FBR:........................................9
2.3.3. Secretary Revenue Division/ Chairman CBR, FBR:...................................................10
2.3.4 Chairman CBR/FBR:.....................................................................................................11
2.4. Chairman of Federal Board of Revenue. ...............................................................................12
2.5. Purpose and Use of Tax:.........................................................................................................13
2.6. Types of Taxes:.......................................................................................................................15
2.6.1 Income Tax. :................................................................................................................16
2.6.2 Capital value Tax. ........................................................................................................16
2.6.3:Corporate Asset Tax.....................................................................................................18
2.6.4:Federal Excise Duty.......................................................................................................19
2.6.5:Special Excise Duty......................................................................................................19
2.7: Departments Of Organization.................................................................................................19
2.7.1 Member (Legal)...........................................................................................................19
2.7.2:Member (Enforcement and Withholing Tax):..............................................................19
2.7.3: Member (Human Resource Management).................................................................20
2.7.4: Member (Customs).....................................................................................................21
2.7.5: Member (Administration)...........................................................................................21
2.7.6: Member (Taxpayer Audit)..........................................................................................23
2.8: Organizational Structure:........................................................................................................34
2.8.1: Operations/Policy.........................................................................................................36
2.8.2: Functional:...................................................................................................................36
2.8.3: Support:.......................................................................................................................37
2.8.4: Revenue Division:.......................................................................................................38
2.9:Software’s Used.......................................................................................................................38
2.9.1 TAMS:..........................................................................................................................39
2.9.2: ITMS:...........................................................................................................................39
2.9.3:STARR..........................................................................................................................40
2.9.4: HRMS.:........................................................................................................................40
2.10:RTO Bahawalpur Organogram..............................................................................................40
2.11:Regional Tax Office Bahawalpur..........................................................................................40
2.12: Some facts............................................................................................................................40
.14: Power & Function not delegated:...........................................................................................41
Unit No.3:......................................................................................................................................42
3.1:FBR Revenue Position.:.........................................................................................................43
3.2Analysis Of Components Of Direct Taxes:..............................................................................44
3.3.: Analysis Of Indirect Taxes....................................................................................................45
3.3.1: Sales Tax (Domestic) Collection & Major Revenue Spinners....................................47
3.3.2:Sales Tax At Import Stage............................................................................................48
3.3.3:Customs Duties..............................................................................................................50
3.3.4 Federal Excise:................................................................................................................51
3.4:Cost Of Collection In Pakistan................................................................................................51
3.5. Issues Related to Cost of Collection in Pakistan:...................................................................53
3.5.1. Taxpayers VS Tax Administrator:...............................................................................53
3.5.2. Excessive Exemptions and SRO Culture:....................................................................54
3.5.3. Meager Resources:.......................................................................................................54
3.5.4. Higher Threshold:........................................................................................................54
3.5.5. Non Availability of Recent data of expenditure for Sales Tax and Income Tax:........54
3.6:Comparsion Of Tax GDP Ratio & Cost To GDP Ratio..........................................................58
3.7.Studied and Learning During Internship.................................................................................58
3.7.1 What is FBR.and Objective of FBR:............................................................................59
3.7.2:Who is Withholding Agent & What are the obligations..............................................60
3..7.3Common Taxes collected in our life contents with sections:.......................................61
3.8:SWOT Analysis.......................................................................................................................62
3.8.1: Strengths......................................................................................................................63
3.8.2:Weakness......................................................................................................................63
3.8.3: Opportunities...............................................................................................................64
3.8.4: Threats............................................................................................................................65
Unit No.4......................................................................................................................................65
4.1. :Weakness of Organization.................................................................................................65
4.2. Conclusion:.........................................................................................................................66
4.3. Recommendations:.............................................................................................................67
4.4. Thanking Letter for Completing Internship:.......................................................................68
References:...................................................................................................................................69
Annexes:........................................................................................................................................70
List of Tables
Table No: 1 “Tax Population of E & C, IP Unit 8, Bahawalpur”
Table No: 2 “Revenue Collection (RS in Millions)”
Table No: 3 “Cost of Collection :( RS in Millions)”
Table 4: Head-wise Revenue Collection: July-March 2012-13 Vs 2011-12 (Rs. Billion)
Table No: 5 “Direct Taxes Collection July-March”
Table No: 6 “Sales Tax Collection: A Comparison: July-March 202-13 Vs 2011-12”
Table No: 7 “Growth in Collection of customs Duties”
Table No: 8 “FED Collection from Major Commodities”
Table No: 9 “Cost of Tax Collection in Pakistan”
Table No: 10 “Comparison of Tax GDP Ratio and Cost to GDP Ratio”
Table No: 11 “Active Taxpayers per tax administrator, selected countries”
Table No: 12 “RTO Bahawalpur Analysis”
Table No:13“Income Tax Analysis”
Table No: 14 “Sales Tax Analysis”
Table No: 15 “Federal Exercise Duty Analysis”
List of Graphs
Graph No: 1 “Quarter wise comparison of Collection”
Graph No: 2 “STD Collection Share % of Major Ten Items
Graph No: 3 “Share % of top Ten Commodities in STM Collection FY: 2012-2013”
Graph No: 4 “Share of Major Commodities”
Graph No: 5 “Collection”
Graph No: 6 “RTO Bahawalpur Income Tax Analysis”
Graph No: 7 “Income Tax Analysis RTO Bahawalpur”
Graph No: 8 “RTO Bahawalpur Sales Tax Analysis”
Main Entrance RTO Bahawalpur:
Page | 1
Unit No.2Excutive Summary:
nternship training program during of BS Commerce is necessary for the completion of
Degree. It is necessary for me to complete an internship session of about 6 weeks inI “FEDERAL BOARD OF REVENUE” which is the largest tax collecting organization in Pakistan
& is having a thoroughly established chain throughout the country. An extensive network of 3
large tax pair and 18 regional tax offices makes it one of the largest organizations in Pakistan only.
FBR consists of following major departments:
Audit department
legal Department
HRM Department
Admin Department
Collection and Enforcement Department
Customs department
The function of audit department is to work on the defaulted files through internal and external
auditing. They have to find the difference between the tax payer income shown and which really
exists, if any are found the penalties and extra tax is charged.
The legal wing/department does his function by reposing confidence in the taxpayer community
and simultaneously implementing the tax laws fairly and squarely, the FBR is in the process of
achieving growth in revenues. Legal Wing of the FBR helps in implementation of the tax laws
fairly and squarely which in turn contributes to achieving growth in revenue.
The Legal Wing of FBR is to introduce reforms of reduction in litigation coupled with creating
better environment for taxpayers to discharge their obligation to the State.
HRM department works on how to increase the employee’s motivation. All issues of employees
are resolved by the HRM department i.e. vacations, code of conduct functioning of employees.
Complete information of a certain employees is recorded here.
Page | 2
Collection and enforcement department function is how to collect the revenues and
implementations taxes.
Customs department is responsible for implementing the custom duties on the entry and exit on
the boundaries of country. Custom duties are paid at the port stage and Levi on import and export.
FBR is focusing on the improvement of audit to increase their revenues; new taxing technologies
are also introduced. FBR has distributed his offices on territorial basis naming as inland revenues
are also called regional tax offices. NTN (national tax number) are also focused to avoid excess
taxing.
FBR is also using two software’s which are used for withholding tax and sales tax to save time and
improve efficiency.
The main objectives were:
To gain knowledge about the professional environment of public sector organization
FBR.
To know about the technologies used in FBR for tax collection and related matters.
To deal and manage in the stressful working environment of FBR.
Convert the knowledge learnt from books into practical experiences.
To get experience in working with well reputed organization.
Discover where further competence is needed.
Compulsory for the completion of degree.
To get familiar with the tactics used for taxation in Pakistan.
Page | 3
2.1.1. Vision Statement:
To be an organization, which is
Modern
Progressive
Effective
Credible for optimizing revenue by providing quality service and promoting compliance
with tax and related laws
2.1.2. Mission Statement:
Increase the capability of the tax system to collect taxes through application of modern
techniques, providing taxpayer assistance and by creating a motivated, dedicated and satisfied,
professional work force.
2.1.3. Values:
Integrity
Professionalism
Teamwork
Courtesy
Fairness
Transparency
Responsivenes
Page | 4
2.2. Federal Board of Revenue
2.2.1 Brief History:
When Pakistan came into being, the Government of Pakistan promulgated the Income Tax Act,
1922, as amended up to the date for regulating the taxation system in Pakistan. The provisions of
the Act were extended to the whole of Pakistan except the specified area. A Taxation Inquiry
Committee was introduced in 1958 which was consisting of officials and the representatives of
trade and commerce. Taxation Inquiry Committee submitted a report after keen analysis
of prevailing tax system and suggested some recommendations. Some of the recommendations
were accommodated which resulted in the amendment of Income Tax Act, 1922. Before 1959,
super tax was imposed on the incomes of all the persons but in registered firm and companies. In
1959, the rates of each slab were expressed as a percentage of income considering the
recommendations of Taxation Inquiry committee.
Before 1960, the financial year was considered from 1st April to 31st March but in 1960, it was
changed from 1st July to 30th June. In 1961, FBR introduced an "Income Tax Committee". Main
purpose of introduction of such committee was to make recommendations for simplification of
the Income Tax Act, 1922 and procedure of taxation. Before 1965, an assessment officer was
assessed the income and determined the tax liability of the person but in 1965, "Self Assessment
Scheme" was introduced. Till 1979, lot of amendments was made in the context of the Income
Tax Act, 1922. As a result of these amendments, the Act became a complicated law and
difficulties arose in its working. Keeping these difficulties in view, the Government promulgated
a new income tax law namely "The Income Tax Ordinance, 1979" through the Finance
Ordinance on June 28, 1979 and included all the basic concept of the repealed Act, so that the
Page | 5
benefit of the whole case law built up over the last 57 years is not rendered useless.
In 1985, the Federal Government formed a National Tax Reform Commission. It was consist of
members of Senate and National Assembly, high government officials and renowned
industrialist. Major purpose of such commission was to suggest way and means to improve the
existing structure of tax laws in Pakistan. In 1999-2000, under the Income Tax Ordinance, 1979,
an income tax survey was conducted to analyze the prevailing taxation structure and to procure
the suggestions and recommendations from surveyors. Many tax amnesty schemes were
introduced under the Income Tax Ordinance, 1979. These schemes were introduced to provide a
chance to black money holders, so that they can change their black money into white money.
Latest scheme was introduced in the year 2002.
Under section 1, the Ordinance specifies that The Income Tax Ordinance, 2001 shall be the short
title of the law. Under section 1, the Ordinance specifies that the Income Tax Ordinance, 2001
shall extend to the whole of Pakistan. According to section 3 The Income Tax Ordinance, 2001
overrides other laws enforceable in Pakistan. It means, in case of any contradiction between the
provisions of the Income Tax Ordinance, 2001 and any other law of the country, the provisions
of the Income Tax Ordinance, 2001 shall prevail. The preamble of the Ordinance specifies the
object of law. It specifies that the Income Tax Ordinance, 2001, is promulgated to consolidate
and to amend law relating income tax and provide for matters ancillary to and connected with the
income tax. The FBR under the authority of section 237 of the Income Tax Ordinance, 2001
made the Income Tax rules, 2002.
These rules were published on July1, 2002 in Extraordinary Gazette of Pakistan at pages 1819 to
Page | 6
1966. To update the income tax law in Pakistan according to the requirements of time, different
methods of changes have been adopted by competent income tax authorities like S.R.O's and
Circular’s etc. Finance Act is the regular source of change; it is presented in the month of June in
each year. Finance Act, 2009 is one step to continuance process of change.
The Central Board of Revenue (CBR) was created on April 01, 1924 through enactment of the
Central Board of Revenue Act, 1924. In 1944, a full-fledged Revenue Division was created
under the Ministry of Finance. After independence, this arrangement continued up to 31st August
1960 when on the recommendations of the Administrative Re-organization Committee, FBR was
made an attached department of the Ministry of Finance. In 1974, further changes were made to
streamline the organization and its functions. Consequently, the post of Chairman FBR was
created with the status of ex-officio Additional Secretary and Secretary Finance was relieved of
his duties as ex-officio as chairman of FBR.
In order to remove impediments in the exercise of administrative powers of a Secretary to the
Government and effective formulation and implementation of fiscal policy measures, the status
of FBR as a Revenue Division was restored under the Ministry of Finance on October 22, 1991.
However, the Revenue Division was abolished in January 1995, and FBR reverted back to the
pre-1991. By enactment of FBR 2007 the Central Board of Revenue has now become Federal
Board of Revenue.
Page | 7
2.2 . Function of FBR/Revenue Division:
In the existing setup, the Chairman, FBR, being the executive head of the Board as well as Secretary of the
Revenue Division has the responsibility for:
Formulation and administration of fiscal policies,
Levy and collection of federal taxes and
Quasi-judicial function of hearing of appeals.
His responsibilities also involve interaction with the offices of the President, the Prime Minister, all
economic Ministries as well as trade and industry.
2.2.3 Nature of Organization:
Federal Board of Revenue is the supreme authority for tax collection in Pakistan. Taxes collected by FBR
form major part of the state revenues. FBR has monopoly in tax collection in the country. It is playing very
vital role in smooth running of state affairs regarding expenditures of the country.
2.2.4. Scope and volume of Federal Board of Revenue:
Federal Board of Revenue is an accelerated network of Tax collection offices throughout the country. It has
the authority to collect taxes from each and every person of the country who is liable to pay tax according
to Income Tax Ordinance 2001. Collection of taxes is being increased day by day because new taxpayers
are being added in the tax net, and working of FBR has got better.
Page | 8
2.2.5: Organogam of FBR
Page | 9
2.3 . Management of the Organization:
The names of Secretaries/ Ex-officio Chairmen, full time Chairmen and Secretary General Revenue
Division/ Chairmen, who headed the Revenue Division/ CBR/FBR from August 14, 1947 onwards, are
presented below for ready reference.
2.3.1. Finance Secretaries/ Ex-Officio Chairmen, CBR:
1) Sir Victor Turner 14.08.1947 01.02.1950
2) Mr. Abdul Qadir 01.02.1950 25.02.1952
3) Mr. Mumtaz Hasan 25.02.1952 01.11.1958
4) Mr. H. A. Majid 01.11.1958 29.07.1960
5) Mr. M. Ayub 29.07.1960 19.06.1961
6) Mr. Mumtaz Mirza 19.06.1961 06.03.1963
7) Mr. M. M. Ahmed 06.03.1963 30.05.1966
8) Mr. GhulamIshaq Khan 31.05.1966 08.09.1970
9) Mr. A.G.N. Kazi 08.09.1970 10.10.1971
2.3.2. Secretary General Revenue Division/ Chairman, CBR/ FBR:
1) Mr. M. Abdullah Yusuf 14.06.2006 23/07/2008
2.3.3. Secretary Revenue Division/ Chairmen, CBR/FBR:
1) Mr. Sajjad Hasan 03.10.1991 03.11.1992
2) Mr. M. Mubeen Ahsan 03.11.1992 03.05.1993
Page | 10
3) Qazi M. Alimullah 03.05.1993 17.07.1993
4) Mr. Javed Talat 26.07.1993 01.07.1994
5) Mr. A.R. Siddiqi 11.07.1994 11.01.1995
6) Mian Iqbal Farid 07.11.1998 06.11.1999
7) Mr. Riaz Hussain Naqvi 08.11.1999 02.07.2001
8) Mr. Riaz Ahmad Malik 03.07.2001 11.03.2004
9) Mr. M. Abdullah Yusuf 12.03.2004 14.06.2006
10) Mr. Ahmad Waqar 23.07.2008 17.05.2009
11) Mr. Sohail Ahmed 19.03.2010 24.12.2010
12) Mr. Salman Siddique 24.12.2010 21.01-2012
13) Mr. Mumtaz Haider Rizvi 21.01.2012 10-07-2012
14) Mr. Ali Arshad Hakeem 10-07-2012 09-04-2013
15) Mr.Ansar Javed 10-04-2013 30-06-2013
16) Mr.Tariq Bajwa 05-07-2013 to date
2.3.4. Chairmen, CBR/FBR:
1) Mr. M. Zulfiqar 11.10.1971 17.11.1973
2) Mr. Riaz Ahmad 17.11.1973 30.09.1974
3) Mr. M. Zulfiqar 01.10.1974 12.11.1975
4) Mr. N.M. Qureshi 12.11.1975 14.12.1980
5) Mr. Fazlur Rahman Khan 14.12.1980 11.08.1985
6) Mr. I.A. Imtiazi 11.08.1985 20.08.1988
7) Syed Aitezazuddin Ahmed 20.08.1988 02.01.1989
Page | 11
8) Mr. GhulamYazdani Khan 22.01.1989 11.08.1990
9) Mr. AhadullahAkmal 16.08.1990 24.07.1991
10) Mr. SajjadHasan 24.07.1991 03.10.1991
11) Mr. Alvi Abdul Rahim 13.07.1995 28.08.1996
12) Mr. Shamim Ahmed 28.08.1996 11.11.1996
13) Mr. HafeezullahIshaq 11.11.1996 02.01.1998
14) Mr. Moinuddin Khan 02.01.1998 06.11.1998
15) Mr. Sohail Ahmad 18.05.2009 24.12.2010
16) Mr. Salman Siddique 24.12.2010 21.01.2012
17) Mr. Mumtaz Haider Rizvi 21.01.2012 10-07-2012
18) Mr. Ali Arshad Hakeem 10-07-2012 09-04-2013
19) Mr. Ansar Javed 10-04-2013 30-06-2013
20) Mr.Tariq Bajwa 02-07-2013 till Date
Page | 12
2.4. Chairman Federal Board of Revenue:
Mr. Tariq Bajwa
Chairman FBR Mr. Tariq Bajwa, an officer of the Pakistan
Administrative Service, brings with him vast experience of
Public Policy formulation and implementation with special
focus on public and corporate finance.
Mr. Tariq Bajwa has a degree in Law and Political Science from the Punjab University. He later achieved a
Master’s degree in Public Administration from Kennedy School of Government, Harvard University where
he was awarded the prestigious Litterer Fellowship for academic excellence.
Mr. Tariq Bajwa has served in various key positions in the federal and provincial governments. He served
in the Prime Minister’s Secretariat, Government of Punjab, UNDP, ERRA and other organizations as well
as serving as Joint Secretary Ministry of Industrial Production & Special Initiatives in the federal
government and as Head of Pakistan’s Trade Mission in Los Angeles, USA. Before joining FBR as
Chairman, Mr. Tariq Bajwa was working as Finance Secretary in the Government of Punjab.
In the existing setup, the Chairman, FBR, being the executive head of the Board as well as Secretary of the
Revenue Division has the responsibility for:
Formulation and administration of fiscal policies,
Page | 13
Levy and collection of federal taxes and
Quasi-judicial function of hearing of appeals.
2.5: Purpose and Use of Tax:
The purpose of taxation is to finance government expenditure. One of the most important uses of taxes is to
finance public goods and services, such as street lighting and street cleaning. Since public goods and
services do not allow a non-payer to be excluded, or allow exclusion by a consumer, there cannot be a
market in the good or service, and so they need to be provided by the government or a quasi-government
agncy, which tend to finance themselves largely through taxes.
2.6: Types of Taxes:
FBR collects three major types of tax:
Income tax
Feera excise
Sales tax
FBR collects major of its revenues from customs and federal excise as well as income tax. FBR is playing a
vital role in Pakistan Customs is the guardian of Pakistan borders against movement of contra band goods
and is facilitator of bona fide trade. It provies a major source of revenue to the Government of Pakistan in
the form of taxes levied on the goods traded across the borders. It also helps to protect the domestic
industry, discourage consumptions of luxury goods and stimulate development in the under developed
areas.
Pakistan economy has confronted difficult challenges in the past few years, external and domestic
Page | 14
economic shocks, political uncertainty and security problems. Faced with these challenges, Pakistan has
implemented several reforms, including under the recent expired stand-by-arrangement with IMF, which
helped the economy avoid a full blown crises. More recently, however, continued security issues, two
major floods and large fiscal deficit have contributed to make inflation persistently high and limit growth
And employment creation. This has left Pakistan economy highly vulnerable.
2.6 :Types of Taxes:
2.6.1: Income Tax
An Income Tax is a tax levied on the income of individuals or businesses for corporations or
other legal entities. Various income tax systems exist, with varying degrees of tax incidence.
Income taxation can be progressive, proportional, or regressive. When the tax is levied on the
income of companies, it is often called a corporate tax, corporate income tax, or profit tax.
Individual income taxes often tax the total income of the individual with some deductions
permitted, while corporate income taxes often tax net income for example the difference between
gross receipts, expenses, and additional write-offs.
A personal or individual income tax is levied on the total income of the individual (with some
deductions permitted). It is often collected on a pay-as-you-earn basis, with small corrections
made soon after the end of the tax year. These corrections take one of two forms: payments to
the government, for taxpayers who have not paid enough during the tax year; and tax refunds
from the government for those who have overpaid. Income tax systems will often have
deductions available that lessen the total tax liability by reducing total taxable income. They may
allow losses from one type of income to be counted against another. For example, a loss on the
stock market may be deducted against taxes paid on wages.
Page | 15
Taxation according to a person’s ability to pay is universally accepted principle, and income is
considered a satisfactory though not a sufficient index of such ability to pay. Income Tax is,
therefore, generally recognized as a highly equitable form of taxation. A tax levied on income
can normally be shifted to others and thus its incidence is on those for whom it is intended. Since
income tax is progressive in nature, it tends to reduce economic disparity. Tax rates and method
of calculating taxable income varies with fiscal status of the tax payer.
2.6.2. Capital Value Tax:
It is payable by individuals, firms and companies which acquire an asset by purchase or a right to
use for more than 20 years.
2.6.3. Corporate Asset Tax:
It is levied through section 12 of the Finance Act, 1991. This is one time levy payable by a
company as defined in Companies Ordinance, 1984, on the value of fixed assets held by the
company on the specified date.
2.6.4. Federal Excise Duty:
Federal Excise Act, 2005, was promulgated with effect from 1st July, 2005, repealing the Central
Excises Act, 1944. Following are some of the significant changes brought about by the new Act:
The word “Federal” was used in place of “Central”. Therefore, now the term “Federal
Excise Duty” is more appropriate as compared to old “Central Excise Duty” for the duties
of excise levied under the 2005 Act.
The system of physical supervision has been entirely done away with and now all
clearances will be self-assessed and no prior permission for clearance will be required.
Page | 16
The payment of duty will be on monthly basis and the duty on all clearances during the
month will be payable by the 15th of next month. This is in contrast to previous
requirement of payment of duty prior to clearance.
No gate passes are required for clearances as in the old system.
Double taxation has been eliminated by allowing adjustment of the excise duty paid on
the input goods used directly in the manufacture of excisable goods.
Federal Excise Duty is payable on:
Goods produced or manufactured in Pakistan;
Goods imported into Pakistan;
Such goods as the Federal Government may, by notification in the official Gazette,
specify, as are produced or manufactured in the non-tariff areas and are brought to the
tariff areas for sale or consumption therein
Services, provided or rendered in Pakistan
2.6..5. Special Exercise Duty:
As part of budgetary measures for the year 2007-08, Special FED at 1% has been levied on
goods which are manufactured or are imported in Pakistan. This duty is in addition to FED as
prescribed in First Schedule of the Federal Excise Act, 2005.
Page | 17
2.7. Departments:
2.7.1 Member (Legal)
Mr.Ahmad Dildar
Mr. Ahmad Dildar, Member (Legal), senior officer of Pakistan Customs Service 9th CTP (BS-21) has a rich professional and academic experience. He, in his illustrious career spanning over 33 years, has served on various key positions across the country including:
I. Registrar Federal Shariat Court of Pakistan;II. Member (Legal), FBR;
III. Chief (Administration), FBR;IV. Secretary for Attorney General Office;V. Joint Secretary Law Division;
VI. Program Director Access to Justice Program; andVII. Collector Customs & Sales Tax.
He is L.L.M. and M.A Political Science and has attended a number of courses and seminars home and abroad.
LEGAL WING'S TEAM
Mr.Ahmad Dildar
Member Legal
Mr.Muhammad Yousaf
Page | 18
SPS to Member Legal
Mr. Khalid Gill
S.O to Memebr Legal
Mr. Ahmad Raza Khan
Chief (Legal-I)
Mr. Tarique Chaudhry
Chief (Legal-II)
Mr. Akram Ch.
Secretary Legal (SC-Lit.)
Mr. Nowsherwan Khan
Secretary Legal (DT/HC-lit)
Syed Faisal Bukhari
Secretary (Legal)
Mr. Jehan Buhadar
Secretary Legal (IDT)
Mr. Muhammad Ashfaq
Second Secretary Legal (T.O-I)
Mr.Rashid Javaid Rana
Secretary Legal (Automation)
Mr. Mansoor Sadiq
Second Secretary Legal (T.O-II)
Syed Babar Ali Shah
Second Secretary Legal (HC-Lit.)
Page | 19
2.7.2. Member (Enforcement & WHT):Mr.Ali Salman Abbasi
Mr.Ali Salman Abbasi a BS-21 Officer of 11th CTP, is the Member Enforcment in the FBR Headquarters.
Job Descriptions:
1. Preparation of Annual Integrated Enforcement Action Plan2. Analysis of data obtained from field formations regarding enforcement activities,
including data of withholding taxes, arrears, etc.3. Quarterly presentation of findings and recommendations based on aforementioned
analysis before BIC4. Liaison with Member (IR-Operations) regarding collection of withholding taxes Plan &
Design procedures regarding5. Taxpayer Registration including control of non-registration6. Tax Declarations including control of non-filing7. Tax payments8. Collection of tax arrears9. Collection of with-holding taxes10. Perform any other duty or task assigned by the Chairman, FBR
Page | 20
2.7.3. Member (HRM):
1. Secretary HRM (Ms. Aisha Farooq)
2. Second Secretary HRD ( Syed Mazhar Hussain Shah)
3. Secretary IJP (Ms. Adeela Yusuf )
4. Second Secretary (Ms. Sumria Mahmood Qazi)
2.7.3. Member Customs:
Mr. Nisar Muhammad Khan
Mr. Nisar Muhammad, a BS-21 Officer, is the Member (Customs) in the FBR Headquarters. Mr.
Nisar, a senior officer of Pakistan Customs Service has previously served on various key
positions across the country. He attended many seminars /workshops abroad relating to tax
administration and reforms. His last posting was Member Strategic Planning Reforms &
Statistics. Mr. Nisar did MBA from Quaid-E-Azam University, Islamabad and M.Sc. Defense &
Strategic Studies from National Defense University, Islamabad
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2.7.5. Member (Administration):
Mr. Shahid Hussain Jatoi
Mr. Shahid Hussain Jatoi, a BS-21 Officer of Secretariat Group, has
served in various key positions across the country during his
illustrious career spanning over a period of 33 years. He was posted
as Senior Joint Secretary, M/O Production prior to taking charge as Member (Administration) at
FBR (HQ), Islamabad. He brings with him a rich professional and academic experience in fiscal
matters as before joining Secretariat Group recently, he was an officer of Inland Revenue
Service. In addition to Commissioner of territorial/ corporate Zones, he remained posted as
Director General (WHT), FBR and Chief Commissioner of Large Taxpayer Unit and Regional
Tax Offices, Karachi.
2.7.6. Member (Taxpayer Audit):
Mr. Haroon Muhammad Khan Tareen
Mr. Haroon Muhammad Khan Tareen, a BS-21 Officer, from 10th
CTP is the Member (Taxpayers Audit) in the FBR Headquarters. Mr.
Haroon, a senior officer of Inland Revenue Service has previously
served on various key positions across the country. His last posting was Accountant Member,
Appellate Tribunal IR, and Bench-I Islamabad. Mr. Haroon did MSc in Defense and Strategic
Studies from National Defense University, Islamabad Pakistan.
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2.8. Organizational Structure:
In the present setup, the Chairman/Secretary, Revenue Division, FBR is assisted by the following
Members and Additional Secretary, Revenue Division distributed along four broad functional
categories.
2.8.1. Operations/Policy:
Customs
Senior Member Inland Revenue (Policy)
2.8.2. Functional:
Strategic Planning and Statistics
Audit (Taxpayers)
Facilitation and Taxpayers Education
Training
Enforcement
Accounting
2.8.3. Support:
Legal
Administration
HRM
2.8.4. Revenue Division:
Additional Secretary
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2.9. Software’s used:
to use this software. Reports about each and every matter related to tax
can be prepared using ITMS.
2.9.1. STARR:
All the software’s of FBR are built and prepared by PRAL Pakistan
Revenue Automation (Pvt.) Ltd . PRAL has also provided its
technicians to FBR for maintenance of the software’s.
2.9.2. TAMS:
TAMS software is being used in FBR for the operations of Audit
department. TAMS stand for Taxpayer Audit Management System. It
is used for feeding the information relating to the taxpayers who are
under the process of audit or have been under this process. All
information about the causes of their being under audit, Process, follow
up actions and the final decisions about them are recorded in this
software.
2.9.3. ITMS:
ITMS stands for Integrated Tax Management System. It is reporting
software and only officers have access to this software officials are not
allowed
Sales Tax Refund Repository is the software being used for Refund
cases management.
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2.9.4. HRMS:
Human Resource Management Solutions software is being used by
FBR for keeping the record of employees and managing their careers.
HQ’s have complete access to this software they can
Inspection
The Directorate General, Internal Audit (Inland Revenue) is responsible for Inspection and Audit
of Federal Revenue Authorities in respect of their Revenue collection assignment with a view to
improve performance and service delivery.
The Income Tax Ordinance, 2001 has increased the responsibilities of InternalAudit Authorities
manifold. The introduction of Universal Self-Assessment Scheme as well as re-organization
under Tax Administration Reform Program on functional lines has opened new areas for
improvement but not without challenges. The doctrine of voluntary compliance by the taxpayers
has definitely placed the tax authorities under a lot of pressure to prove their professional
worth.Further, detection of cases of concealment, underreporting, misreporting and cases of tax
evasion are now based upon records, details provided and third party information which is not
easy to collect and correlate due to the fact that retrieval of information and collection of record
was often found difficult after the change in organizational structure. The object of inspection is
not only to keep control on the quality of work but also to ensure implementation of the FBR’s
policies for bringing about improvement of tax administration.
Page | 25
The purpose of inspection is also to create a fair, transparent and independent working
environment to enhance the revenue generation capability of the FBR and to guide, educate and
assist the field formations to improve overall quality of work.
Inspection may also focus on the qualitative aspect of performance of the officers with reference
to their respective duties and functional jurisdictions and also to evaluate their statutory duties.
Under these circumstances the job of inspection authorities is to assist the field formations in
improvement of quality of work as well as to plug leakage of revenue
Aims & Objectives:
The basic aim of inspection is to examine, identify and report fairly and impartially tax evasion,
underreporting and under assessment and loss of revenue; due to negligence, inefficiency,
omissions and commissions. These, inter-alia, include misapplication of law, improper
maintenance of record, inadvertent mistakes and procedural lapses etc. The inspection authorities
make recommendations for improvement in the system, with the ultimate object to create a just,
fair and tax friendly culture.
Types of Inspections
Two types of inspections are conducted namely:-
Regular inspection
Special Inspection
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Regular Inspection
Regular inspection is conducted according to a schedule of inspection issued by the Director to
the Additional Directors in the beginning of each financial year. This inspection may be of a
division, unit of a division or any other office of RTO, LTU or a functional unit or office of
Inland Revenue.
Special Inspection
Special inspection is conducted in respect of assessment records of a particular taxpayer or class
of taxpayers or inspection of records of a division, unit of a division or any other office of the
RTO, LTU or a functional unit authorized or assigned by theDirector-General of Internal Audit
(Inland Revenue) as a special case and is conducted by the Additional Director without prejudice
to the schedule of regular inspection issued to him/her or may be conducted by the Director
himself/herself if so specified by the Director General of Internal Audit (Inland Revenue).
Method of Inspection
The following procedure is being followed by the inspection team comprising Additional
Director and his supporting staff in conducting an inspection:
The inspection authority intimates to the concerned field officer in LTUs/RTOs regarding
inspection schedule and visits the said RTOs/LTUs to discuss the inspection work plan.
The requisition of MPR/performance data and record of cases is made by the inspection
authority followed by access to all requisite information and relevant record including
computerized record, diskettes, floppies, hard discs available in the office.
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The inspecting authority after completion of initial scrutiny communicates draft
observations on daily basis to the respective officer before finalization of inspection
report.
The respective taxation officer is required to respond within seven (7) days to settle the
observations.
Replies of the officers in charge are considered by the inspecting authorities before the
draft notes are incorporated in the inspection report.
Final inspection notes are serialized and incorporated in the inspection report along with
the prescribed format on completion of the inspection work according to the method
prescribed. The inspection report under the signature of inspection authority is delivered
to the respective taxation officer within 15 days of the receipt of reply from the said
officer, with copies to Chief Commissioner, LTUs/RTOs and Commissioner of the
respective Division.
The Director then forwards a copy of inspection report to the Director-General of Internal
Audit (Inland Revenue) along with his comments and the inspection control format.
Year-wise computerized inspection control record is maintained in the office of each
Director.
Follow up action
In order to settle objections or comments made in each serialized note of the inspection report
and to retrieve the loss of revenue, if any, follow up action is taken independently at each level as
under:
Page | 28
i. The Deputy Director/Assistant Director/Extra Assistant Director pursues the matter with the
respective officer of the field formation after the delivery of inspection report and furnishes
compliance report within 30 days.
ii. The Additional Director takes cognizance of the unsettled notes on the basis of follow up
report of the Deputy Director/Assistant Director/Extra-AssistantDirector and takes up the matter
with the respective Additional Commissioner to ensure compliance within 10 days. In case the
matter is not resolved, theAdditional Director reports the matter to the Director, Internal Audit
(Inland Revenue) under intimation to the respective Commissioner.
iii. The Director, Internal Audit (Inland Revenue) takes up the matter with the respective
Commissioner to ensure resolution within 10 days. If the matter remains unresolved, the Director
takes up the matter with the ChiefCommissioner, RTOs/LTUs, as the case may be, and furnishes
report to theDirector-General of Internal Audit (Inland Revenue) under intimation to the
respective Chief Commissioner, RTOs, LTUs highlighting measures adopted for follow up and
disposal of the matter.
iv. The Director-General of Internal Audit (Inland Revenue) then allows 20 days for compliance
to the respective Chief Commissioner, RTOs/LTUs.
Page | 29
2.10. RTO Bahawalpur Organogram
Page | 30
Additional Commissioner Additional Commissioner Additional Commissioner
LDCLDCLDC
UDCUDCUDC
Unit StaffUnit StaffUnit Staff
Extra Assistant Commissioner
Extra Assistant Commissioner
Extra Assistant Commissioner
Assistant CommissionerAssistant CommissionerAssistant Commissioner
Deputy CommissionerDeputy Commissioner
Assistant Commissioner
Deputy Commissioner
LDC
UDC
Deputy Commissioner
Extra Assistant Commissioner
Unit Staff
Chief Commissioner
Commissioner BTB Commissioner Withholding Commissioner E&C Commissioner Audit
Additional Commissioner
2.11. Regional Tax Office Bahawalpur:
One of the 18 RTOs established under tax reforms.
Made operational w.e.f. 01-08-2010
It was carved out of Central Region, Multan.
Now it include of 04 civil districts of Southern Punjab namely Bahawalpur, Rahim
Yar Khan, Bahawalnagar and Lodhran
2.11.1. Some Facts:
It is 2nd year of operation of the Region.
The Total population of the territory under the operation of Region is 12.500 million
approx.
Urban share of Total Population is 23% approx.
Total area of these districts is 47378 sq KM.
The area being the hub of cotton production, most of the businesses revolve around
cotton. However, only Two out of six Textile Mills are on the tax roll of the Region.
Seven Sugar Mills, Two Fertilizer Factories, One Steel Mill, One Beverages and One
Cable/Wire Unit are operating within the Region but these are being taxed in other
Regions.
A big unit of Unilever/Lever Brothers is located at Rahim Yar Khan but taxed at Karachi
Page | 31
2.13. Power and Functions not delegated:
1. Allow change in method of accounting.
2. Allowing change in method of stock valuation.
3. Receive and decide application to allow income year is different from fiscal year.
4. Allow special year as income year.
5. Approve bank, financial institution or leasing Co. for the purpose of section 77(4) of
Income Tax Ordinance, 2001.
6. a. Receive notice from Liquidators.
b. Issue intimation Liquidators.
c. Allow sale permission to Liquidators, and
d. Allow lesser tax to be deposited on sale.
7. a. Issue reduce advance tax rate certificate for imports.
b. Issue any kind of exemption certificate.
c. Receive declaration/notice from non-residents representative or Payer (Creditor).
d. Issue Order of “Nil” deduction.
8. Allow record to be maintain otherwise than as prescribed.
9. Prescribed period for NTN Card.
10. Refund penalty if prosecution launched.
11. Compound an offence – by Order.
12. File complaint with Special Judge for prosecution.
13. All issues of jurisdiction.
14. Authorize a person to obtain information of taxpayers for return processing.
15. Determine date of establishment of fish farm – unit etc.
16. Certificates of exempt income.
17. Approve sale contract in Pakistan against International Tender of locality
manufactured goods.
18. Power to obtain information from Banks and Financial Institutions u/s 176.
19. Revision by the Commissioner u/s 122A.
20. Power to enter and search premises u/s 175.
21. Powers to delegate U/s 210(1).
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22. 122(5A) except Officer BS-19.
23. Select a case for Audit u/s 177.
24. Imposition of penalty for obstructing of Income Tax Authority discharging official
duties.
UNIT NO.3:
3.1. FBR Revenue Position:
The economy of Pakistan has entered current FY 2014 along with persistence key challenges to
macroeconomic management emanated from both the internal and external sectors. On the
revenue side FBR has generated Rs.3129 billion at the end of year 2013 and attained lower
growth of 4.9% over previous year’s collection. One of the major reasons of this sluggishness is
the lower economic activities and anemic investment.
The tax-wise performance indicates that except FED, all other taxes have registered a positive
growth during first three quarters of CFY. The collection of customs has grown by 14.7%,
followed by direct taxes 5.5% and sales tax by 4.9%.
Table 4: Head-wise Revenue Collection: July-March 2013-14 (Rs. Billion)
Target Provisional
collection
Achievement of
target%
Direct Tax 77.9 743.4 95.4
Sales Tax 865 842.5 97.4
Federal Excise 122.0 121.0 99.2
Custom Duty 241 239 99.4
All Taxes 2007 1946.4 97.00
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As a result, growth in the large scale manufacturing sector was dismally low throughout
the year; therefore, revenue realization from the manufacturing sector and related
businesses has also been badly affected. Almost all the macro economic targets fixed for
FY: 2013-14 were missed. Since revenue realization is linked with macroeconomic
framework, therefore the adverse impact on the economy has also adversely affected the
revenue realization to a great extent during the year. FBR was assigned a challenging
revenue target of Rs 2381 billion, requiring a growth of 26.5% over the year 2013-14.
FBR collected Rs 1,946.4 billion at the end of FY: 2013-14 with modest growth of 3.4
percent. It may be highlighted that the original target of Rs.2,381 billion was, however,
downward revised to Rs. 2007 billion and both the targets have been missed (Table 4).
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3.2. Analysis of Components of Direct Taxes:
The components of direct taxes are collection on demand (COD), voluntary payments (VP) in
the shape of tax with returns, advance tax and withholding taxes (WHT).
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Table No: 5 “Head wise Performance of Direct Taxes 2013-14 vs 2012-13”Head 2013-14 2012-13 Growth Share% Share%
Voluntary payment
244,920 237,366 3.2 33.1 32.1
Collection on demand
89,427 129,977 -31.2 12.1 17.6
Deduction at Source(WHT)
436,087 420,457 3.7 59.0 56.9
Miscellance 5574 240,93 -76.9 0.8 3.3
Gross Income Tax
776,008 811,893 -4.4 100 100
Total Direct Taxes
743,409 738,424 0.7 -- --
The net collection stood at Rs. 743.4 billion reflecting a growth of 0.7% over the corresponding
period last year despite 42% lesser refunds have been paid back. An amount of Rs. 53.4 billion
refunds has been paid back to the claimants during FY: 2012-13 as against Rs 91.6 billion during
FY: 2011-12. It may be recalled that the collection of direct taxes includes income tax and other
direct taxes i.e. capital gain tax, worker welfare fund and worker profit participatory fund. The
contribution of income tax in total direct taxes is around 97%.
1355 - 13 - The structure of income tax is based on withholding taxes (WHT), voluntary
payments (VP) and collection on demand (CoD). The collection during FY: 2012-13 shows that
the share of WHT, VP and CoD in gross collection has been 59%, 33.1% and 12.1%
respectively. Details of these components of income tax are presented in Table 4.
3.3. Analysis of Indirect Taxes:
The indirect taxes are comprised of three components: sales tax (GST), federal excise duties, and
customs duties. The major contribution in indirect taxes is made by sales tax followed customs
Page | 36
and federal excise duties. The tax-wise performance has been highlighted in the following paras.
3.3.1. Sales Tax: Sales Tax is the leading source of federal tax receipts.
Table No: 6 “Sales Tax(Domestic) Net Collection By Major Commodity FY: 2013-14 and
FY:2012-13 ”
Commoditites 2013-14 2012-13 Growth%
2013-14
Share%
2013-14
POL products 177.582 149,617 18.7 43.1
Natural Gas 36,312 28,793 26.1 8.8
Telecom 18320 49050 -62.7 4.4
Fertilizers 15615 13578 15.0 3.8
Cement 14523 12529 15.9 3.5
Beverages 10909 7574 44.0 2.6
Electrical Energy 10750 8869 21.2 2.6
Sugar 8910 9182 -3.0 2.2
Machinary 8307 9740 -14.7 2.0
Services 7430 618 1102.3 1.8
Margarine 6245 16205 -61.5 1.5
Iron & Steel 4899 5191 -5.6 1.2
Motor Cars 3433 3471 -1.1 0.8
Liquefied P.G 3178 2415 31.6 0.8
Sub Total 329.132 318,392 3.4 79.9
Other Sector 83,565 56109 48.9 20.1
Sales
Tax(Domestic) Net
412,697 374,501 10.2 100
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The petroleum products have been the top revenue spinner of sales tax domestic and contributed
around 43% in the total sales tax domestic collection during 2013-14. Its net contribution was
Rs. 177.6 billion in 2013-14 against Rs. 149.6 billion in 2012-13, recording a growth of 18.7%.
The second major revenue source is natural gas which has recorded a growth of 26.1% by
collecting Rs 36.3 billion. Main reason of significant growth is the substantial increase in its total
sales value which jumped from Rs. 503,122 million in 2012-13 to Rs. 590,097 million with an
addition of around Rs. 87 billion. The higher growth has ben attained despite increase in
input/output ratio to 73% in 2013-14 as compared to 66% in PFY.
A healthy growth of 15% was recorded in STD collection from fertilizers during 2013- 14. The
total sales value of fertilizers increased from Rs.164,323 million in 2012-13 to
1855 - 18 - Rs.212,829 million in 2013-14 recorded a growth of Rs. 48,506 million or 29.5%.
Moreover, the input/output ratio also decreased from 61% to 51% in 2013-14.
The collection from cigarettes increased by 15.9% during 2013-14 and in absolute terms about
Rs. 2 billion additional revenue was collected as compared to PFY. The total sales of cigarettes
increased form Rs. 97,033 million in 2012-13 to Rs. 120,969 million in 2013-14, recording a
growth of 24%.
The collection from cement jumped from Rs.7.6 billion in 2012-13 to Rs. 11 billion in 2013-14
entailing a substantial growth of 44%. Total sales value in absolute terms has enhanced from Rs.
164,541 million to Rs. 210,753 million with a growth of Rs. 46.2 billion or 28.1% growth. The
increase in the sales of cement indicates extensive construction activities in the country.
Page | 38
The collection from the beverages recorded a growth of 21.2% in 2013-14 as compared to 2012-
13. The reason of increase in collection is due to considerable jump in its sales value. The total
sales value increased from Rs. 125,784 million to Rs. 172, 603 million in 2013-14, showing an
increase by 37%. The collection from telecom sector has exhibited negative growth of 62.7%
mainly due to shifting of Punjab related telecom sector to the province.
The collection from sugar has declined by 14.7% in 2013-14. The export sales of sugar increased
by around 31 billion and moreover, the input/output ratio increased from 20% to 27% in 2013-14
as compared to PFY.
The electrical energy is another item which recorded a negative growth of 3% in 2013- 14. Major
reason of decline seems increase in exempt sales from Rs.8,543 million in 2012-13 to Rs. 29,802
million in 2013-14 and input/output ratio of 108% by the sector.
Commodity-wise Refunds Analysis The refund payments to the major sectors has been depicted
in Table 10 . Overall Rs.30 billion refunds were paid during FY: 2013-14. The share of top 15
sectors was around 50%. The leading refund payees were electrical energy, POL products, cotton
yarn, iron & steel and services where an amount of Rs. 12.6 billion were paid to these sectors.
The share of these five sectors stood at 47% in the total refund payments during the FY 2013-14.
The rest 3% related to other sectors.
Further details indicate that Electrical Energy sector is the top refund beneficiary sector where
Rs. 5.1 billion has been paid back whereas growth in net collection from this sector has been 3%
in STD collection. Second major refund payee is POL sector with amount of Rs. 3.4 billion and
sharing 11.3% in total refunds of STD.
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3.3.2. Sales Tax (Domestic) Collection and Major Revenue Spinners:
The overall net collection of sales tax domestic during July-March 2012-13 stood at 283.7 billion
against Rs. 255.5 billion in the corresponding period last year. The net collection grew by 11%.
The quarter-wise data indicates that collection has picked up in third quarter with around 18%
growth as compared to growth attained in first and second quarters by 5.5% and 9.7%
respectively. The growth momentum of third quarter if maintained or enhanced can be helpful to
reduce the revenue shortfall faced in first two quarters of CFY.
The commodity-wise detail of domestic sales tax collection during July-March 2012-13 confirms that
a significant growth has been witnessed in cement, natural gas, and POL products (Table 6). Telecom
services recorded a negative growth of 54.4% mainly because of shifting of services to provinces.
The collection of sales tax is skewed towards few items and only major ten items shared around 79%.
Major contributor is POL products with 44.9% followed by natural gas with 10% share in gross
collection of sales tax domestic.
Graph No: 2 “STD Collection Share % of Major Ten Items
Page | 40
3.3.3. Sales Tax at Import Stage:
The net collection of sales tax at import stage stood at Rs. 312.3 billion against Rs. 312.9 billion
in the corresponding period last year, thus leading to a negative growth of 0.2%. The quarter-
wise growth in collection of STM has been 7.4%, (-) 8.9% and 1.2% respectively. The overall
growth in July-March period stood at (-) 0.2% mainly due to the declining dutiable imports. The
negative growth in STM has affected badly the overall federal tax revenues in CFY. Although
the collection from sales tax at import stage is dependent on imports, the lower imports would
automatically reduce the STM collection and conversely higher imports would positively affect
the STM revenue. Nonetheless, more vigilance and monitoring by MCC staff can be helpful in
enhancing the revenues.
Commodity-wise details reveal that top ten major commodities have contributed 80% in sales tax
imports (Table-6). POL products are at top with 35% share in STM collection, followed by
vehicles, plastic & machinery sharing 6% each. Except POL products and vehicles all other
major items recorded a negative growth in collection during July-March 2013-14.
Table-6: Commodity Wise Collection of Sales Tax at Import Stage(Rs. in billion)
Commodities Collection Share %
2013-14 2012-13 Growth%
POL Product 156.3 157.3 0.6 36.3
Edibleoil 32.3 34.9 7.5 7.5
Vehicles 26.8 28.1 4.7 6.2
Iron & Steel 21.8 21.8 0.3 5.1
Plastic Resins 20.6 26.1 21.1 4.8
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3.3.4. Customs Duties:
The customs duty is the 3rd major revenue source of the federal taxes collected by FBR. The
share of customs duties in indirect taxes and total federal taxes has been around 20.1% and
12.6% respectively. An amount of Rs. 63 billion as collection has been realized during July-
March, 2013-14 against around Rs. 55 billion in PFY. The collection is 15% higher than the
collection of last year.
Commodities 2013-14 2012-13 2011-12 Growth% Share % Target
Ach..%
POL prod. 21.6 20.2 18.4 9.9 8.1 93.9
Edibleoil 48.4 42.3 43.1 1.8 17.0 86.7
Vehicles 4.5 3.7 3.5 5.2 1.5 82.3
Iron steel 10.9 7.1 7.8 (9.7) 2.8 64.9
Plastic
Resins
9.6 8.8 8.8 0.2 3.5 91.8
The commodity-wise information presented in Table 7 reveals that 5 major commodities
contributed more than half of the gross receipts from customs. The major share came from
vehicles (17 percent) followed by POL products (8 percent), edible oil (8 percent),
mechanical machinery (5 percent) and electrical machinery (4 percent).
5.25 The custom duty collection from vehicles registered a 2 percent decline over the
previous year’s collection of Rs.43 billion. The current year’s collections stood at
Rs.42 billion making up 87 percent of the budgeted figure of Rs.49 billion.
Custom duty collections from edible oil grew by 10 percent and stood at Rs.20
Page | 42
billion in 2013-14 against the previous fiscal year’s collection of Rs.18 billion
constituting 94 percent of the budgeted amount.
5.26 The custom duty collections from POL products increased by 16 percent and
stood at Rs.20 billion. Despite the growth, the custom duty collections missed the
budgeted target of Rs.22 billion, by 9 percent. In addition, the collections from
mechanical machinery rose by 7 percent and stood at Rs.12.4 billion.
3.3.5. Federal Excise:
The collection from federal excise duties has registered a negative growth of 4.9% during July-
March: 2012-13. The net revenue stood at Rs.80.7 billion against Rs.84.8 billion during the
corresponding period last year. The major reason for negative growth is the fact that FED is a
fading tax as the base has been shrunk continuously for the last few years. In the Budget FY:
2013-14 and 2012-13 the rates of cement and beverages were reduced and duty was abolished on
most of the petroleum products and perfumery & cosmetics.
The commodity-wise collection of major revenue spinners provides a comparison between JM:
13-14 against JM: 12-13 (Table 8).
Table No: 8 “FED Collection from Major Commodities July-March: 2013-14 Vs 2012-13”
The six revenue spinners of FED that have contributed major part of FED are cigarettes, cement,
beverages, natural gas, edible oil and services . The combined share of these six items has been
around 79% during July-March 2013-14. The major amount is contributed by one item i.e.
beverage 139.7 % achivied FED collection.
Page | 43
Commoditite
s
Budget
2013-14
Collection
2013-14
Collection
2012-13
Growth% Share
%
Total
Achivied
POL pro. 5.1 0.2 5.8 (96.6) 0.2 3.9
Cigarettes 56.7 62.00 53.5 15.9 51.8 109.3
Cement 14.1 3.00 0.8 27.5 2.5 21.3
Total servies 10.2 13.3 10.4 27.9 11.1 130.4
Beverage 7.8 10.9 12.7 (14.2) (9.1) 139.7
3.4. Cost of Collection in Pakistan:
The cost of collection in Pakistan has been in the range of 0.81-0.89% in the last five years. It
means that FBR is spending 80-90 Paisa’s on the collection of every Rs. 100 rupees. Year-wise
cost of collection for the last five years are:
Table No: 9 “Cost of Tax Collection in Pakistan”
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3.5. Issues Related to Cost of Collection in Pakistan:
3.5.1. Taxpayers VS Tax Administrator:
It is evident from Table 4 that number of taxpayers per tax administrator is small. This number is
near to Turkey (65) and Egypt (71). On the other hand, this number is quite small as compared to
Philippines (937), Canada (631) and Australia (621). As far as composition of employees of FBR
is concerned, there is a large number of unskilled staff. The officers to staff ratio in FBR is tilted
in favor of staff. Martinez (2006) rightly pointed out that the composition of the FBR staff is
very problematic and the FBR is seriously overstaffed at the lower ranks and understaffed in key
functional areas, such as audit. In the face of self-assessment in vogue in domestic taxes, there is
a need of increasing auditors and skilled staff for maximum revenue generation.
Table No: 12 “Active Taxpayers per tax administrator, selected countries”
Page | 45
3.5.2. Excessive Exemptions and SRO Culture:
Apart from huge cost of exemptions in term of revenue foregone, there is another cost of time
consumption. The application of tax become difficult and takes more time the treatment of
exempted goods for checking exemptions/SROs while ensuring due revenue deposited in
national exchequer. The tax administrator has to check for exemption while collecting tax
revenues.
3.5.3. Meager Resources:
Despite best efforts, the tax-GDP ratio is low. The government has to allocate most of the budget
to the payment of debt servicing, defense etc. In this scenario, modernization of FBR requires
funds. In fact, more resources are required by the government for better enforcement and
improved compliance. Hence, the government has to look for donors like World Bank and IMF.
3.5.4. Higher Threshold:
Before 2004-05, thresholds of sales tax for retailers and manufacturers were one million rupees
and 0.5 million rupees respectively. Due to their lower contribution by small retailers and
manufacturers, threshold was increased to five million rupees during 2004-05. It was justifiable,
to a great extent, in view of cost and benefit considering in collecting revenues from small
businesses where a large workforce is required and cost of administering tax is extremely higher.
3.5.5. Non Availability of Recent data of expenditure for Sales Tax and Income Tax:
After the formation of Inland Revenue, expenditures are compiled for RTOs and LTUs where all
the domestic taxes are collected. The data for collection is available for individual taxes of Inland
Revenue but expenditure are not available separately.
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3.6. Comparison of Tax GDP Ratio and Cost to GDP Ratio:
Only around 0.1% of the GDP is being spent on the collection of tax revenues in Pakistan.
Table No: 10 “Comparison of Tax GDP Ratio and Cost to GDP Ratio”
Table No: 10 “Comparison of Tax GDP Ratio and Cost to GDP Ratio
3.7: Studied and Learing During the Internship:
3.7.1:What is FBR, Objectives:
The tax-to-GDP ratio in Pakistan is low and only certain population groups are actually paying
taxes. The Federal Board of Revenue (FBR) is responsible for the collection of both direct and
indirect federal taxes in Pakistan. The Direct taxes include Income Tax, Workers Welfare Fund,
Workers Profit Participation Fund and Capital Value Tax. The Income tax and other direct taxes
are collected from corporations, association of persons (AOPs), individuals through voluntary
payments and on demand following assessment. In addition, withholding taxes are collected by
various withholding agents. Indirect taxes collected by FBR include General Sales Tax (GST),
Customs Duties and Federal Excise Duty (FED). The bases for GST and Excise Duty are sales
production of services and manufacturing activities carried out in the country; whereas import
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related taxes like customs duty, sales tax (import), FED (import), and Withholding Taxes
(import), depend on the volume of imports.
3.7.2:Withholding Agent’s Obligations:
Every withholding agent(person obliged to collect or deduct tax at source) collecting or
deducting tax under the provisions of the Income Tax Ordinance,2001 is obliged to issue
certificate of tax collected or deducted, to the person from whom such tax has been collected or
deducted.
Where the tax is deducted from salary under section 149 of the Income Tax
Ordinance,2001:
a. The certificate of tax deducted is to be issued within 45 days from the end of each
financial year; and
b. Where the employment ceases before the end of the financial year,the certificate is to
be issued for the period of employment in that year within 7 days of the ceasing of the
employment.
Where the tax is collected or deducted under any other provisions of the Income Tax
Ordinance,2001:
a. The certificate of collection or deduction is to be issued within 15 days from the
end of each financial year or discontinuation of business.
b. If the person from whom tax has been collected or deducted requests for the
issuance for the certificate before the end of the financial year.
The procedure for deposit of the tax collected or deducted at any branch of State Bank of
Pakistan and National Bank of Pakistan, currently, is as under:
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Manual Payment:
At branches, which are not fully automated, through tax deposit receipts (Challan) dully
filed and completed ( in respect of the requisite particulars and details as stated above).
Electronic Payment:
The pre-requsite is that the withholding agent should have a digital signature and an
account with National Bank of Pakistan from where the electronic transfer of funds can
be done.
3.7.3: Common use the tax collected content with Sections:
o Payment Of Salary (section 149)
Person responsible for paying salary
From Whom: Employee
Rate:
On salary exculuding flying and submarine allowance-Annually Rate( to be
calculated as per rate card and as reduced by applicable Reduction in tax liability) after
making adjustment for.
a. Any other adjustable tax collected or deducted at source (which is not a final tax)
form employee during the tax year;
b. Any excess deduction or deficiency arising out of any previous deduction:
c. Failure to make deduction during the year.
d. Tax credit admissible under section 61, 62, 63 and 64 during the tax year;
2.50% on flying allowance not exceeding basic salary
2.50% on submarine allowance not exceeding basic salary.
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On: salary chargeable to tax
When: At the time the salary is actually paid
Payment for Goods, Services and Execution of Contracts:(Section 153(1)
Person liable to deduct tax:
Federal Government, Company, Association of Persons, Non-
profit organization, Consortium or joint Venture.
Form Whom: Resident person
Rate: 1.50% sale of rice, cottonseed or edible
3.50% sale of any other goods( by a company)
4.00% sale of any other goods ( by a person other than a company)
2.00% Transport services
6.00% Execution of contact ( by a company)
On: Gross amount of payment on account of:
a. Sale of goods inclusive of sales tax payable
b. Rendering of or providing of services inclusive of sales tax payable
c. Execution of a contract inclusive of sales tax payable
When: At the time the amount is actually paid
Payment of Rent of Property:
Person liable to deduct tax:
Federal Government, Provincial Government , Local
Government , Company, Non-Profit-Organization and any other person notified by the
Federal Board of Revenue.
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From whom: Recipient of rent of immovable property
Rate: In case of an individual or an association of persons.
Gross Amount of Rent Between Rate of tax deduction
Rs. O and Rs. 150,000 0%
Rs. 150.001 and 1.000,000 10% of the gross amount of rent
exceeding Rs.150,000
Exceeds Rs.1,000,000
Rs.85000 plus 15% of the
gross amont of rent exceeding Rs.1000,000
Receipt of Electricity Consumption Bills:( Section 235)
Person preparing electricity consumption bill
Form whom:
Commercial and Industrial consumers of electricity excluding a consumer
who produces a certificate from the commissioner that his income is exempt form tax during
a tax year.
Rate: Where the amount of electricity bill
a. Does not exceed Rs.400 (Rs.0)
b. Exceeds Rs.400 but does not exceed Rs. 600 (Rs.80)
c. Exceeds Rs.600 but does not exceed Rs.800 (Rs.100)
d. Exceeds Rs.800 but does not exceed Rs.1000 (Rs.160)
e. Exceeds Rs.1000 but does not exceed Rs.1500 (Rs.300)
f. Exceeds Rs.1500 but does not exceed Rs.3000 (Rs.350)
g. Exceeds Rs.3000 but does not exceed Rs.4500 (Rs.450)
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h. Exceeds Rs.4500 but does not exceed Rs.6000 (Rs.500)
i. Exceeds Rs.6000 but does not exceed Rs.10,000 (Rs.650)
j. Exceeds Rs.10,000 but does not exceed Rs.15000 (Rs. 1000)
k. Exceeds Rs.15000 but does not exeed Rs.20000 (Rs.1500)
l. Exceeds Rs.20000 ( 10% of the billed amount for commercial consumers; and
5% of the billed amount for industrial consumers.
On: Amount of electricity consumption charges
When: Along with payment of electricity consumption charges
3.8. SWOT Analysis:
3.8.1. Strengths:
One of the largest organization in public sector
FBR is major part of federal revenue collection source for the Govt. of Pakistan
It’s machinery, It’s employees playing vital role in tax collection
Computerized system for certain registrations
Federal Board of Revenue is federal organization so prioritize then all other provincial
tax organizations. (provincial govt. collect tax on vehicles & property)
Laws and legislations for strengthen FBR
Special allowances are given to employees according to their performances
Special pay scale
Autonomous power enhance the effective decision power
Special pay scale given by autonomous organization is lead employees to efficient out
put
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FBR is having 3 large tax pair offices (LTO) and 18 regional tax offices (RTO).
FBR pays handsome salary to his employees
PRAL [Pakistan Revenue Automation (PVT) LMT] consulting services for Govt. tax and
revenue agencies
Qualified and experienced managemen
3.8.2. Weaknesses:
Federal Board is the only organization for tax collection for federation
Laws and legislations
Complications in recovery process
Monitoring of whole organization is difficult
Tax collection system is not compatible to small social setup and business norms
in the country
Old employees having lack of information technology and cannot use latest
taxation software’s
Reward on recoveries had banned 6 years before
Time consuming process in rotation of files even for very minor thing
Labor unions spoils the working environment where they prefer their personal
motives over overall organizations goals
Lack of promotion
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3.8.3. Opportunities:
Organizational change for better working environment
Multimedia to facilitate human resources
Machinery usage
Improve and Speed up the system through software and advance technology
New taxpayers can be made through different strategies
Tax system can develop through reviewing tax system of other countries and
by adapting in a way to useful in our circumstances
Job rotation for dynamic learning
Reward on certain recoveries for motivation of employees
Collect record of other organizations to get rid from corruption
3.8.4. Threats:
Consultants persuaded and motivate taxpayers at their oneself that how
taxpayer can get rid from taxes
Peculations of taxpayers due to absence of file automations
Unaware lay persons are caught in double taxing
black sheep’s in the organization which advises tax pairs how to reduce their
taxes
Taxpayers can deceive due to insufficient data
Dependencies on PRAL
Unit No.4
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4.1. Conclusion:
It is well established that cost of tax collection is low in Pakistan as compared to number of the
countries. It implies that taxation system is reasonable on this score and reflects administrative
efficiency to some extent. It does not mean that everything is going well on part of tax
administration. On the other hand, outcome of the resource mobilization efforts is low as tax-
GDP is quite low. In this context, cost of collection is a weak indicator of efficiency of tax
administration due to various limitations and irrelevancies.
There are various issues with taxation system of Pakistan like huge exemptions, wider tax gap,
low tax-GDP ratio, less effective audit and penalty system etc. If these issues are settled, tax
revenues will improve significantly which will further bring down cost of collection.
Improvement in revenue collection through reduced cost of collection should then be viewed as a
by-product of effective management of human and physical resources. More resources are
required for modernization and enforcement. Similarly, skilled personnel will have to be
increased. There is a need to modernize the taxation system and more funds are required to be
allocated for human resource development.
4.2. Recommendations:
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Organizational change for better working environment
Multimedia to facilitate human resources
Improve and Speed up the system through software and advance technology
Tax system can develop through reviewing tax system of other countries and
by adapting in a way to useful in our circumstances
Job rotation for dynamic learning
Punctuality of workforce
Reward on certain recoveries for motivation of employees
Collect record of other organizations to get rid from corruption
Avoid double taxation and create awareness among taxpayers about the
benefits of registration
Training should be given to the FBR workforce about modern auditing
techniques
Fraud awareness and indicators of fraud should be well known for inspection
Avoid gender biasness
Accountability system should be developed
Hire educated people instead of undergraduate people.
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4.3. Thanking Letter for Completing Internship:
Federal Board of Revenue
RTO Bahawalpur
Sarwar Shaheed Road, Model Town A, Bahawalpur
Date: September 18, 2014
Subject: Thank You Letter after Internship
Dear Chief Commissioner,
While I am excited about graduation, I am sad about leaving my internship at RTO Bahawalpur.
I have enjoyed working with the staff and learning to apply business concepts. Training an
intern was a lot of work for you and I appreciate your time and patience in answering my
questions and finding interesting tasks for me.
This summer’s internship with your company has been a truly incredible experience, and I thank
you for this excellent opportunity. The internship has allowed me to learn, expand my skills, and
revise my future career goals No doubt; the experience you have provided will serve as a Key
factor in grooming of my personality and will have a tremendous impact on my Career Success.
Thank you again for this excellent opportunity. I look forward to staying in touch with you and
your staff members.
Kind Regards and Thanks
Yours sincerely,
Adnan Akram
BS 6th Morning
Department of Commerce
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The Islamia University of Bahawalpur
References:
Federal Board of Revenue
www.fbr.gov.pk
FBR Quarterly Review, Vol 12, No 3, January March 2013
Shukla, Kuo and Jenkin, (2000), “Tax Analysis and Revenue Forecasting”, Hovard
Institute for International Development, Harvard University.
Bird and Zolt (2003), “Introduction to Tax Policy Design and Development”, draft
prepared for World Bank.
Dr. Ather, Robina, Mir Ahmad and Naeem Ahmed (2004),”How Efficient is the Revenue
Organization? ” FBR’s Quarterly Review, July-March, 2004.
Shome (1995), “Tax Policy Handbook”, Fiscal Affairs Department, International
Monetary Fund, Washington D.C.
Martinez Vezquez (2006), “Pakistan: A Preliminary Assessment of Federal Tax System”,
Georgia State University, USA.
GOP (2014), Pakistan Economic Survey, 2013-14
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