Prize bonds to be made registered instrument to broaden tax base
ISLAMABAD: The government decided to convert almost all the prize bonds into registered instruments in a move to keep record of investors and curb tax evasion and money laundering, sources said on Friday.
Presently, prize bonds can be purchased from open market and used as an instrument to evade taxes. It is difficult to identify money trails.
Officials confirmed that the government would convert all the prize bonds, except those with small denominations, to registered instruments from bearer in a phased manner to discourage their use for money laundering and whitening black money.
Prime Minister Imran Khan has already approved the conversion of Rs100,000 prize bond into a registered instrument and the process is underway to do the same for Rs40,000 prize bond.
Sources said the government is also planning to utilise the transaction data to broaden the tax base. The new exercise involves identifying and pursuing individuals falling outside the tax net through the use of third-party information.
The Federal Board of Revenue (FBR) has access to third party data, such as travel, bank accounts, car and property ownership, children studying abroad and high-fee schools. But, the FBR does not have adequate capacity to utilise the data using latest techniques and therefore it would be necessary to collaborate with researchers and experts to develop efficient and effective analytical tools.
Meanwhile, officials said the government is considering a study to categorise different withholding taxes according to desirability of maintaining, amending or phasing out them. Withholding taxes become regressive if people who are not liable to income taxes and/or if firms treat them as consumption taxes pay them and they are passed through to consumers. The government is also planning to ensure simple, unified, broad-based tariff rates.
The government is also working to increase the efficiency of public expenditures. It has constituted a task force on civil service reforms and a task force on austerity and restructuring of the government. A sub-committee of the latter is preparing a roadmap to improve the budgeting and public financial management system.
In addition, the government is also taking actions to improve the efficiency of public expenditure. For this, a comprehensive Public Financial Management Act (PFMA) has been drafted, which after necessary reviews will be present for approval of the parliament in the third quarter of 2018/19, the officials said.
The act aims to fill the gaps in the present PFM system, update the outdated PFM-related legal provisions and eliminate distortions in the existing system. “The law will help in more prudent expenditures and financial management within the federal government,” an official said.
The government is presently reviewing the draft of Public Investment Management bill, which intends to enhance the efficiency of federal investment, including public sector development program, by streamlining the planning and investment management processes. Moreover, the government reform task force has made several recommendations to improve management of government expenditures.
The task force recommended that the budget allocations for each ministry should be made under only two heads: employee related expenses and single line item for all operational spending rather than providing budgetary funds to the line ministries in itemised details.
The principal accounting officer, assisted by the chief financial officer, would be empowered to run the operational expenses without prior approval of the ministry of finance except in case of acquisition of assets. In addition, supplementary grants would be discontinued.
The computer-based financial accounting and budgeting system should be used for transactions as well as a tool for decision making. The system should be fully interlinked among all stakeholders and participants to fill gaps, enhance the system’s capabilities, extend coverage and add functionalities. Standard as well as tailor-made reports should easily be accessible from the dashboards, according to the task force.
