Tuesday , July 23 2019
Breaking News
Home / Islamabad / FBR Chairman Bajwa impressed by Turkish tax system
FBR Chairman Bajwa impressed by Turkish tax system

FBR Chairman Bajwa impressed by Turkish tax system

ISLAMABAD: Being overwhelmingly impressed by the Turkish Tax System, Federal Board of Revenue (FBR) Chairman Tariq Bajwa will brief Finance Minister Ishaq Dar on his recent visit to Turkey.

“In the upcoming board and council meeting, members of the delegation will inform the finance minister and other officials concerned about their experiences and what they had learnt during their visit to Turkey,” a well-placed source at the FBR informed this scribe.

Tariq Bajwa led a six-member delegation consisting of Inland Revenue Policy Member Shahid Hussain Asad, Inland Revenue Operations Member Muhammad Ashraf Khan, Special Assistant to Chairman D Muhammad Iqbal, Member Nadeem Dar and others on a five-day official visit to Turkey last Saturday to hold meetings with Turkish tax authorities.

The Revenue Administration is a public institution of the Turkish Republic operating under the Ministry of Finance and Revenue. The institution is responsible for levying and collecting state taxes and respecting the taxpayers’ rights within the framework of constitutional law and tax legislation.

The visit is part of activities under an memorandum of understanding (MoU) signed with the Deutsche Gesellschaft für Internationale Zusammenarbeit (GIZ), which is an international enterprise owned by the German government, operating in many fields across more than 130 countries.

During their visit, the Pakistani delegates got a briefing from Turkish tax authorities on Turkey’s tax system as well as tax incentives. The delegates also shared experiences and proposals for making an effective system for broadening tax collection network.

The participants of the delegation also interacted with Turkey’s taxpayers to monitor and gauge the effectiveness of tax collection system. In this regard, the delegation attended interactive sessions with the host authorities.

The delegation was amazed over the well-conceived mechanism for Turkish direct taxation system which consisted of two main taxes; income tax and corporate tax. Under this mechanism, an individual is subject to the income tax on his income and earnings, in contrast to a company which is subject to corporate tax on its income and earnings.

It was also a matter of interest that the rules of taxation for individual income and earnings are provided in the Income Tax Law 1960 (ITL).

While the rules of taxation for corporate sector are provided in the Corporation Tax Law (CTL) 1949. Despite the fact that each is governed by a different legislation, many rules and provisions of the Income Tax Law also apply to corporations, especially, in terms of income elements and determination of net income.

The delegation visited markets and offices of tax administration to monitor tax policy, structure monitored in two other cities besides Istanbul and got impressed by Turkish tax system.

They observed that Turkey had achieved remarkable growth in tax to GDP ratio in last 30 years and presently it stood at 27% tax and it was based on information technology.

They also found minimum tax avoidance and when a participant asked about percentage of corrupt tax practices in Turkish system, the host could not understand the question because corrupt practices were not familiar in Turkey. Then the questionnaire had to rephrase his question.

The Turkish tax authorities also assured full support and cooperation to FBR in adopting Turkish tax model to improve the tax revenue. However, success of the said system will depend on autonomy of FBR because Turkish tax authority is autonomous. For this purpose FBR will have to be made autonomous as Turkish tax authority.

It is relevant to note here that as per Turkish tax model, liability for the tax falls on the person, who supplies or imports goods or services, the real burden of VAT is borne by the final consumer.

This result is achieved by a tax-credit method where the computation of the VAT liability is based on the difference between the VAT liability of a person on his sales (output VAT) and the amount of VAT has already been paid on purchases (input VAT).