Islamabad:
Plastic bag manufacturers have accused the Federal Board of Revenue (FBR) of billions of rupees in annual tax evasion by major producers of the commodity due to malfunctioning production monitoring systems.
Industry players have sought the intervention of new finance minister Muhammad Aurangzeb, who is also advocating end-to-end digitization of the tax system to eliminate leakages.
The Polypropylene Woven Sack Manufacturers Association (PWSMA) has proposed mandatory printing of codes on plastic bags and code readers on production lines — a move it claims could increase the size of the formal economy by 20%.
The association has sought the intervention of the finance minister for mandatory printing of codes on plastic bags used by various manufacturing sectors. Polypropylene Woven Sack Manufacturers Association President Iskandar Khan also wrote a letter to the finance minister.
The association has highlighted flaws in the FBR’s monitoring and detection system at a time when there is increased focus on digitizing the FBR to discourage leakages.
On Thursday, FBR Chairman Amjad Zubair Tiwana briefed the International Monetary Fund (IMF) on various initiatives including digital invoices and tracking and tracing system.
However, the FBR seems reluctant to adopt modern technologies and all its previous initiatives have failed to yield the desired results, including the tracking and monitoring system. The tracking system was installed to record the actual sales of sugar and tobacco producers.
The FBR is now looking to fill three more Grade 20 posts to strengthen the Directorate General of Digital Invoicing. A day earlier, the finance minister disapproved of the FBR’s views on filling up the 5,000 vacancies and asked the FBR to consider whether fresh investments should be made in digitization of machinery.
The success of the tracking and tracing system depends on automation and transfer of production data electronically to the FBR, as the automated system for affixing paper seals on polypropylene sugar bags for electronic transmission to the FBR has failed, Khan said.
He revealed that the FBR allowed manual affixing of QR code stamps, which encouraged the use of fake stamps.
The association called for the adoption of mandatory printing of QR codes on polypropylene bags produced for all sectors, including sugar, cement, fertilizers, animal feed, wheat flour, rice and chemicals.
He supports the finance minister’s proposal to issue digital invoices for online data transfer in the FBR, which he says will help cut leakages, along with installing QR-Code readers on production lines while packing industrial products.
The use of QR-Code technology will eliminate rampant tax evasion and significantly increase tax revenue for the Government of Pakistan. In addition, digitization of invoices has been agreed by Pakistan with the IMF.
Khan said the industry was encouraged by the finance minister’s views on digitizing the tax system. Plastic bag manufacturers had proposed printing QR-Codes on polypropylene bags under the Track and Trace system in 2020.
Industry players said implementation of the proposed system would eliminate the highest levels of illicit trade, which consumes 20 percent of Pakistan’s formal economy due to high taxes, ineffective enforcement and poor documentation. Because of this, a cash-based economy thrives at the cost of billions of rupees in tax revenue, undermining the formal tax-paying sector.
Khan complained that despite industry opposition, the FBR chose to affix imported printed QR-Code stamps for the sugar industry on the tracking and tracing system, instead of printing QR-Codes on polypropylene bags during their production in polypropylene factories, with support digital invoices.
Many industries keep two sets of accounts, one for tax purposes and the second showing actual production and sales. FBR’s old plans to capture real incomes through sales monitoring did not help in broadening the tax base and collection.
Published in The Express Tribune, March 15u2024.
Like Businesses on Facebook, follow @TribuneBiz on Twitter to stay updated and join the conversation.
a href=”https://tribune.com.pk/story/2459394/pwsma-pushes-for-digital-tax-fix”>Source link
