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Ending tax officials’ inspection of factories

The decision of Punjab Chief Minister Usman Buzdar to halt inspection of factories by tax officials, and relying on owners’ self-assessment in submission of tax returns, is laudable but the said figures must pass strict scrutiny. Factory owners have long been demanding the scrapping of tax officials’ visits to workplaces as most times they only caused undue pressure. Tax officials’ visits to workplaces often resulted in exploitation, and could not stem the tide of tax evasion. It is yet to be seen if the federal tax collection department – Federal Board of Revenue (FBR) – will also follow suit. The FBR is struggling to settle tax evasion cases and widen the net. It is high time reforms are introduced in the FBR so tax evasion cases are decided at an expedited rate given the fact the board has managed to settle only 30 per cent of the cases this year. Also, tax theft has become a norm in the absence of stringent mechanisms and lack of coordination among departments.
The government has yet to release the self-assessment mechanism. Tax collection departments rely on tax officials’ visits to workplaces and intelligence reports to ascertain tax theft cases. Earlier this year, Intelligence and Investigation-Inland Revenue Directorate General unearthed Rs170 billion worth of tax evasion and fiscal fraud cases. Such efforts bite the dust when tax evaders, having fat bank accounts, spend lavishly on buying time and favours from tax officers and courts.
The recent initiative of the Punjab government stems from traders’ and industrialists’ demands. Some FBR regional tax offices and large taxpayers units had started pursuing the inspections efficiently. Earlier this year in Faisalabad region, traders started a protest drive against, what they call, harassment of traders by FBR officials. They said FRB teams raided their workplaces with gun-touting men and seized their records. The FBR says most times industrialists and traders deny any access to record, and for that reason, they have to raid the places with heavy handed manners.
Whatever the reason, tax officials should not be allowed to humiliate people.
In the self-assessment regime, tax officials should have easy access to business records. They should apply technology, laws and effective intelligence to reach accounts and business transaction details. One can hope the self-assessment scheme will help the government improve tax recoveries. This can happen when, instead of hounding taxpayers, the tax department introduces incentives for taxpayers.



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