LAHORE - The Punjab Revenue Authority is facing difficulties in achieving its revenue collection target due to lack of infrastructure, skilled workforce and political pressure. Several major sectors are still out of PRA’s tax net, resulting into tax collection of only Rs46 billion against annual target of Rs95 billion in 2014-15.
Several sectors which are still evading provincial tax include property dealers, construction companies, travel agents, car dealers and transport companies.
The tax collection target for PRA has been now fixed at Rs72 billion for 2015-16, even below the tax collection target of Rs 95 billion set for last fiscal year, which could not be achieved in last fiscal year.
The standard provincial sales tax rate is 16 per cent but telecom services are chargeable to tax at 19.5 percent. The services of property development and promotion and freight forwarders are chargeable to fixed rates of tax but all these sectors are yet out of tax net. So far, only caterers, restaurants and marriage halls are the focus, which have been given reduced rate scheme of 5 percent tax by the Authority. A similar scheme of reduced tax has also been offered to beauty parlours, car dealers, property dealers, dry cleaners, auto workshops, car wash stations, commission agents and travel agents but they are using political influence to remain out of tax net.
Sales tax on services is a devolved subject to provinces under the 18th constitutional amendment and provinces soon after the passage of the constitutional amendment started making arrangements to meet the challenge.
Like other provinces, Punjab established its own separate Tax Authority and started collection of sales tax on services at the same rates on which FBR used to collect before the 18th amendment. However, province lacking capacity and infrastructure has not produced desired results in terms of volume of sales tax.
Consequently, Punjab placed demands with the FBR for the appointment of officials at provincial revenue authorities to meet the challenge of sales tax collection. But, FBR under the constraints of limited available human resources often turns down the requests forwarded by the provinces.
Experts said that presently PRA is not achieving revenue target also due to lack of infrastructure and technical experts. They said that both the PRA and the Federal Board of Revenue are required to enhance mutual cooperation to increase revenue collection, especially the collection of Sales Tax on services.
Officials said that real estate developers and transporters mafia are major tax evaders and the authority was facing political pressure while dealing with them. They said the authority had served notices on the estate developers including Defence Housing Authority, Eden, Paragon, Lake City and Bahria Town housing schemes but no positive result is appeared so far, as they either moved to court to get stay against the PRA or use political influence to evade tax.
They said that PRA is still using PRAL system to maintain the record of taxpayers which is very complex and does not suit it. The PRA is also facing problems in sales tax collection from dry ports situated in the provincial jurisdictions but owned by the federal entities like Pakistan Railways and others.
Officials said that the Punjab Revenue Authority has developed a system for monitoring of transactions in food sector services and started implementing the scheme of Restaurant Invoice Monitoring System (RIMS). After implementation of RIMS the Authority has achieved revenue target of more than Rs. 4.4 b during the month of August which is Rs. 778 million more than that of August 2014. PRA received taxes under different heads including withholding tax from public and private sectors construction services, travel agents, manpower supplies, software and IT based system development consultants, cargo services, auto workshops, car dealers, laboratories and fashion designers.