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Can Tech Make Tax Collection More Efficient?

The tax regime in Pakistan is criticized more often than not, for two main reasons: its complexity and inefficiency. According to Federal Board of Revenue (FBR), the number of return filers on Active Taxpayers List (ATL) has increased to 1.46 million, reportedly due to action taken by the authorities to increase the cost of transactions for non-filers.

In 2016-17 the tax revenue collection stood at Rs3.37 trillion, leaving a shortfall of Rs.47 billion. For the 2017-18 fiscal year, the FBR initially set a budgetary revenue target of Rs4,013bn, and later revised it downward to Rs3,935bn, reflecting a shortfall of Rs.78 billion.

The complex tax filing process currently implemented by the Federal Board of Revenue (FBR) is relatively difficult for a common man to comprehend. It requires professional assistance while filing tax returns or carrying out other related processes. According to the Internal Revenue Service, it takes about 13 hours for an average American taxpayer to file their return, which includes record keeping, tax planning, form submission and other activities. An obvious impediment in the swift filing of returns.

Besides, the FBR’s process is considered inefficient because the government has thus far been unable to increase the tax net, and continues to tax the same pool of ‘victims’. Little has been done in the past to bring the wealthy under the tax net, but that is for another article

FBR Deputy Commissioner Zehra Farooq, the Regional Tax Officer in Pakistan’s federal capital, explains that the process for tax filing is difficult because of the legislation which empowers it. Since the related legislation is complex hence the rules and procedure which implement these laws are also a bit complex. “Having said that, there are efforts underway to completely digitize the procedure with an aim that eventually people will be able to file their returns themselves.”

In an attempt to further increase the tax net and include more people in it, the FBR is mulling third-party interaction with NADRA and banking institutions to map actual income and spending trends of individuals. “The blueprint of this project is ready, however, there are certain gridlocks we are resolving,” explains Zehra.

Further explaining the tax digitization process, Zehra explains that previously the FBR had no means to store historical data and all personal data was saved manually. Now the institution has set up data centers and will link it to NADRA and banking institutions so that all transactions carried out against any CNIC will become visible to FBR.

Revenue Automation (Pvt) Limited (PRAL) provides the data warehousing technology solutions to FBR and helps it carry out data mining procedures as well, in addition to offering a wide variety of tax and revenue collection solutions. With these data gathering and data mining operations in place, the concern for data protection becomes more serious considering a huge amount of private and confidential data could be at risk.

Zehra assures that the Information Security Systems currently in place are ISO certified. “Access is restricted to a pool of specific IPs which enables access to only authorized employees on specific workstations.”Following the automation of process in 2013, there has been a considerable increase in the amount of taxes being collected annually.

“We can’t be sure whether this ‘unimaginable’ increase is attributed as a result of the digitization process because there were many other factors in place,” said Zehra. She was of the view, however, that investing in technology is actually beneficial for the department. “It’s an investment where the returns are long-term.”

The FBR is also developing a smartphone app to facilitate taxpayers. Aligned with the approach to keep it as simple as possible, the FBR’s hope is this: as the process of filing taxes becomes more efficient and less time-consuming for individuals, the greater will be the likelihood for people to file their returns.

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