Tax laws

Shaukat Tarin launches initiative on simplifying tax laws

ISLAMABAD – In a decisive development and to put his vision into practice, Shaukat Tarin, advisor to the Prime Minister in charge of finance and revenue, initiated the formulation of the tax code with the aim of harmonizing all domestic tax laws and maximizing facilitation of taxpayers.

It promises to ensure the ease of doing business by removing the multiplicity of tax laws and a plethora of rules and regulations designed to operationalize them. It is relevant to mention that FBR, on the national side, implements and enforces four major tax laws, namely the Income Tax Ordinance, 2001, the Sales Tax Law, 1990, Excise Federal, 2005, and the Capital Territory of Islamabad (Sales Tax on Services) Ordinance, 2001. These four tax laws are then supported by an equal number of rules compiled in voluminous books comprising the tax rules on Income, 2002, Sales Tax Rules, 2006, Federal Excise Rules, 2005, and Islamabad Capital Territory (Sales Tax on Services) Rules, 2001. Accordingly, a taxpayer must consult nearly eight law books in order to engage with the tax system and pay his tax liability.

The other day the Prime Minister’s finance and revenue adviser said the government would simplify taxes.

He clarified that two taxes including income tax and general sales tax (GST) will have to be paid by everyone. In the future, he said, there would only be two taxes, namely income tax and consumption tax, while all other taxes would be removed. He said the tax-to-GDP ratio should be increased to at least 20 percent to improve the standard of living of the people.

It goes beyond saying that tax laws needed harmonization and simplification. This has long been demanded by the World Bank, IMF, AfDB and other bilateral and multilateral donors. Likewise, there have been pressing demands from civil society, the lawyer community and also the superior courts which have found the above laws very complex and even unenforceable. However, previous governments did not have the courage to take up this challenge. With this in mind, the PTI government has decided to harmonize these four tax laws by merging them into a single law book supplemented by a single rule book. It is in this context that, in collaboration with the AfDB, a high-level committee was set up by the RBF, composed of eminent public sector tax specialists and legal experts from ICAP, to continuously supervise and review the bill to ensure its quality and accuracy. The said committee would oversee the drafting of the harmonized tax code, covering all tax laws by the end of March 2022. After consultation with all key stakeholders, including chambers of commerce, professional bodies, tax specialists and training on field in April and May 2022, it will be available for presentation to Parliament during the 2022 budget session for promulgation. It is hoped that the new Inland Revenue Code will be applied from July 1, 2022.

This high-value political intervention is organically anchored in the larger RBF vision to promote a culture of automation and digitization to ensure taxpayer facilitation.

In order to ensure that the tax code is thoroughly discussed with all major stakeholders and ultimately developed within the allotted timeframe, the Finance and Revenue Advisor asked the FBR President to personally review the progress of this bill. extremely important and update it regularly. .