ISLAMABAD: Federal Board of Revenue (FBR) Chairman Dr Muhammad Ashfaq Thursday said all-out efforts are being made to fix the distortion in the tax system, so that the ongoing Extended Fund Facility should be last programme of the International Monetary Fund (IMF).

While briefing the Senate Standing Committee on Finance presided over by Senator Talha Mehmood, Ashfaq said that the country has to go to the IMF programme after every few years and accept their demand to fix the tax system, adding that this time the government intention is to put in place an active tax system from July 1.

The FBR is trying to fix the flaws in the tax system to remove distortion, he said that the country does not have adequate resources and wanted the committee members to suggest proposals for increasing the revenue.

He further stated that the IMF was demanding Rs5 million turnover of cottage industry but he was able to persuade them at Rs8 million with contention that Rs5 million would affect the industry.

The chairman committee has recommended keeping intact the old regime on cottage industry. Another official said that there is consumption of 160 tonnes of gold in the country.

The chairman of the committee said 80 tons of gold is being imported illegally. The committee was informed that gold is not allowed to be imported on commercial basis and it is being smuggled into the country. When an official of the Ministry of Commerce was inquired by the committee, he said that although there is no ban on gold import but practically, the conditions are so strict the importers have it themselves arrange the foreign exchange for gold import. The committee did not support the proposal of the FBR to impose 17 percent sales tax on gold.

The committee rejected the proposal to abolish tax exemption on matches industry. Senator Farooq Naek said that the government failure was evident from the fact that neither it was able to increase direct tax collections nor exports and imposing a burden on the common man through indirect taxes.

He questioned why the government is not thinking to charge a fix tax from the business community and suggested that the government should control its expenditure. Senator Musaddiq Malik said that revision of turn over when the rupee has considerably depreciated against the dollar at time this tax was imposed (July 201) and now would destroy the status of cottage industry.

The finance committee also rejected the FBR proposal with regard to inclusion of up to one 1000 square feet businesses in the Tier-I retailers list. The committee also expressed displeasure over the absence of the finance minister and stated that if he does not come, the committee would reject the mini-budget in totality.

He directed the Finance Division official to convey the committee’s message to the finance minister whether the recommendations made by the committee would be incorporated or not. Senator Talha Mahmood said that 14 senators (members of the committee) are in the committee but the finance minister is absent.

Senator Sherry Rehman said that the government has been presenting mini budget every week and prices are increasing every day. She added that petrol, electricity, etc prices have been persistently increasing while gas prices have been raised by more than 300 percent.

She said that 17 percent tax is regressive as it would increase the prices. She said that there are concerns that the prices of medicines will also go up and his party has reservations about mini budget and 17 percent GST.