Tax Compliance through Digitization


Asad Tahir Jappa

Innovative and out of the box measures taken by FBR have contributed to a significant increase in revenue collection

Unlike generally perceived and portrayed, automation of processes & digitization of economic transactions continue to be the two major cornerstones of a robust strategy being followed by Federal Board of Revenue (FBR). Taking its vision forward, FBR has vigorously launched Point of Sales (POS) Invoicing System which is a watershed initiative towards achieving digitization of economy. POS invoicing is a computerized system for recording sales data, managing inventory and maintaining customer data. It is a real-time sales documentation system that links the electronic systems at the outlets of all tier-1 retailers with the FBR via internet.
The system is aimed to ensure that all sales are reported to FBR in real-time and are duly accounted for in monthly sales tax returns filed by such retailers. About 15,500 point-of-sale terminals have been integrated with real time reporting system of FBR. Likewise, Track and Trace System has been rolled out for Tobacco & Sugar Sectors and the same is being introduced in other major manufacturing sectors including Cement, Fertilizer & Pharmaceuticals. This digital monitoring system is aimed at enhancing tax revenue, reducing counterfeiting and preventing smuggling of illicit goods through the implementation of a robust system by affixation of tax stamps on various products at the production stage.
This enables FBR to trace the entire supply chain of manufactured goods, right from production to end users. Building further on its vision to facilitate taxpayers and ensure ease of doing business through automation, digitization, and minimization of human interaction with taxpayers, FBR is all set to launch Single Sales Tax Portal. This facility will enable taxpayers to file single monthly Sales Tax returns instead of multiple returns on different portals; thereby, significantly reducing the time and cost of compliance. In collaboration with NADRA, plans are also afoot to use Artificial Intelligence (AI) and Mathematical Modelling (MM) in order to ascertain real income and thus determine actual tax liability.
Promoting FBR’s vision, there are wide array of out-of-box solutions being designed and executed by Pakistan Customs to ensure transparency, automation of processes and maximize ease of doing business. Automated Duty Drawback Payment System was introduced in September, 2020 by Pakistan Customs, in order to facilitate the exporters, and till 29th October, 2021, a rebate amount of Rs. 28.4 Billion has been credited to the bank accounts of exporters directly by the Customs Computerized System. Similarly, an Online Duty Calculator was introduced for public and traders wherein leviable duty and taxes on import of any goods can be calculated through user-friendly Online Duty Calculator on We-BOC web page. Likewise, automation of export approvals was introduced as a major step towards the ease of doing business for exporters, encompassing automated approvals of various export related schemes. Under the new system, automated approvals are granted by We-BOC system to the exporters based on their profile. In yet another leap forward, Authorized Economic Operator Program (AEO) has been introduced to facilitate the processing of import and export consignment of AEO companies on priority through We-BOC system.
It has introduced a new automated process in We-BOC system for scanning of containerized import consignments of industrial raw materials for their speedy clearance at ports. The introduction of Non-Intrusive Inspection System by Customs was a long-awaited initiative aimed at replacing physical inspection of cargo and reducing the dwell time at ports by using the latest scanning technology in line with international best practices. Furthermore, to achieve trade facilitation in automated environment, reduce clearance times for legitimate trade, improved compliance through increased access to regulatory information and functions, a digital system of Pakistan Single Window (PSW) has been launched. This ensures greater Customs to Customs coordination and linkage with other border regulatory agencies at the national and international level for a well-coordinated border management, enhancing transparency in regulatory processes and decision-making.
Furthermore, to ensure facilitation of taxpayers and maximize ease of doing business, a centralized automated refund system has been introduced with no requirement for manual application and verification. The system-based verification system issues refund directly into the bank accounts of taxpayers without any requirement of face-to-face interactions with tax authorities. An enabling legal framework has also been provided through insertion of relevant provisions in tax law. In order to provide faceless tax administration, reducing compliance cost and saving precious time of the taxpayers, the mechanism of e-hearing has also been devised. Enabling legal provisions for admissibility of evidence collected during e-hearing have been introduced through 227-E of the Income Tax Ordinance, 2001. The mechanism of online filing of appeals has been made available to taxpayers. The requisite enabling legal provisions have been introduced through section 127 of the Income Tax Ordinance,2001.
These innovative and out of the box measures taken by FBR have contributed to a significant increase in revenue collection. The country’ premier revenue collection organization has released the provisional revenue collection figures for the months July-November of current Financial Year 2021-22. FBR has collected net revenue of Rs. 2,319.1 Billion during July-November of current Financial Year 2021-22, which has exceeded the target of Rs. 2,015 Billion by Rs. 304 Billion.
This represents a growth of about 37 % over the collection of Rs. 1,695 Billion during the same period last year. While chasing the set target of Rs. 408 Billion. The net collection for the month of November, 2021 realized Rs. 476 billion representing an increase of 35.5 % over Rs. 348 billion collected in November 2020. These figures would further improve before the close of the day and after book adjustments have been taken in to account. On the other hand, the gross collections increased from Rs. 1,783 billion during July-November, 2020 to Rs. 2,437 billion in current Financial Year, showing an increase of 36.7 %. The amount of refunds disbursed was Rs. 123 billion during July- November, 2021 compared to Rs. 88 billion paid last year, showing an increase of 40.5 %.
It is pertinent to mention that FBR’s drive for digitization started well before two decades and it has continuously been growing from strength to strength, with every passing day. Right from issuance of National Tax Number (NTN), filing of returns, collection of taxes to issuance of refunds, FBR uses its purpose-built web portal for seamless conduct of its multiple operations. Only yesterday, the country’s single largest revenue collection organization has launched an ambitious campaign on POS prize scheme with prizes worth Rs. 53 million every month to be announced through computerized lucky draw. It is indeed a watershed initiative aimed at documenting the economy, minimizing human interaction between taxpayers and FBR, maximizing tax compliance, ensuring transparency and plugging revenue leakages through real time monitoring of sales. This ambitious campaign also strives to promote mass awareness among consumers across the country to ensure that tax collected from them at the point of sale is actually deposited to the state exchequer, without fail. This aggressive campaign on POS comes as yet another testimony to FBR’s commitment to promote a culture of tax compliance through innovative digital interventions.