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National Institute of Management21st Mid Career Management Course 2

RAG-2Improving Quality of Service in Excise & Taxation Department

Covering ADS: MR. Abdul Samad ChannaDate: 3-5-2015

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Group MembersImtiaz Bhatti Ex PCSAshar shahzad FSPTariq Jamil ISIAfzal ZaidiPASAnwar ul Haq PAS

4Sequence

Introduction Functions of Excise wing Function of Taxation Wing Challenges and Key Performance Indicators Impact Analysis Recommendations Conclusion

5Definition of Excise Tax Excise tax refers to an indirect type of

taxation imposed on the manufacture, sale or use of certain types of goods and products

For Example:Excise taxes are commonly included in the

price of a product, such as cigarettes or alcohol or license fee charged from professionals

 http://www.businessdictionary.com

6 Provides services for collection of various taxes

and duties and suggests ways and means for additional resource mobilization in the Province.

 Department aims toMobilize fiscal resources Promote automation and outsourcing of

functions & servicesCreate tax-paying cultureTransform HR into professionally Sound,

motivated team to provide better service delivery

Introduction

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Collection of different taxes Different levies of excise. The department is also tasked with the

enforcement of Hadd ordinance 1979 which deals with the prohibition and licensing of liquors, intoxicants and narcotics.

Functions

8Organizational Structure

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665

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ESTIMATE OF RECEIPTS 706 billion PKR

2015-16

Other Receipts 665Excise and Taxation Department

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Excis

e and

Taxa

tion D

epar

tmen

t

Sindh

Reven

ue Boa

rd

Board

of Rev

enue

Other

Receip

ts0

100200300400500600

41 61 20584

ESTIMATE OF RECEIPTS706 billion PKR

11Composition

There are six Sections in the Secretariat Excise & Taxation Department.

1. Administration-I2. Administration-II3. Taxes4. Excise5. Budget & Accounts6. General

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Collection of Excise Duty onMethylated & Rectified SpiritLiquor

Administration of following LicensesDistillery &LiquorManufacturing of Homeopathic MedicinesChemical WorkOpium Powder

FUNCTIONS OF EXCISE WING

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Control of manufacturing and sale of intoxicating liquor and drugs

The Excise matters are dealt under the following enactments:

Prohibition (Enforcement of Hold) ordinance 1979

Sindh Prohibition Rule 1975 The Sindh Abkari act 1878Sindh Excise Manual Volume-I

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Excise Section

This Section headed by an Excise and Taxation officer and deals in:-

  Record of Monthly detection of Drugs.  Appeal relating to cancellation/suspension of

licenses of liquor and wine shops.  Complaints against the illegal sale of liquor.  Malkhanas. Court Cases pertaining to Excise Crime &

Wine Shops.

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Functions of Taxation Wing

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Following taxes/ duties are now being collected and administrated by the department.Property taxEntertainment DutyMotor Vehicle TaxExcise DutyProfessional TaxCOTTON FEE Infrastructure cessHotel Tax

FUNCTIONS OF TAXATION WING

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Motor Vehicle Registration Levied and collected under Sindh Motor Vehicle Taxation Act, 1958

Types of Motor Vehicle Taxes/Fees:New registration feeRates of transfer feeRate of token tax Motor CarRates of other post transactionRates of security featured itemsRates of withholding taxRates of Motor Tax on Commercial Vehicles

18Property Tax

Levied and collected under under Sindh Urban Immovable Property Tax Act, 1958

Uniform rate of tax on all categories of property @ 25% of annual rental value

Valuation table as per Section 5-A Exemptions

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20

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Professional Tax Levied and collected under Sindh Finance Act,

1964 and it includeAll persons assessed for Income TaxAll limited companies with minimum paid

up capital and reserve of PKR 1 millionAll establishments other than limited

companies with minimum annual turnover of PKR 0.5 million

Establishments not assessed for Income Tax taxed at PKR 500 per annum

All petrol pumps and CNG stations taxed at PKR 2500 per annum

22Hotel Tax

Hotel Tax is levied and collected under Sindh Finance Act, 1977.

Hotel Tax is collected on ad-valorem basis @ 7.5% of room rent per lodging unit per day at the occupancy ratio of 60% & 40%

23Cotton Fee

Cotton Fee is levied under the Cotton Control Ordinance 1968.

The base of the Cotton Fee is the quantity of Raw Cotton brought for ginning in the Cotton Ginning Factory.

The rate of Cotton Fee is Rs. 10/= per 100 K.G. of Raw Cotton.

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Entertainment Duty Levied and collected under Sindh Entertainment

Duty Act, 1958 Entertainment places such as Dramas, Plays,

Amusements, Parks, Sports etc. Dramas, plays, variety Programs - 10% of the

payment for admission Games and Sports 5% of the payment for

admission Items of amusement other than above 25% of

the payment for admission Presently no duty is being collected from

Cinemas.

25Infrastructure Cess

The Cess is levied and collected @ 0.9% to 0.95% on C and F value of a consignment of goods entering the province from outside the country through Air or Sea and on its movement

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Challenges & Key Performance Indicators

27Challenges

a) Lack of Policy Attention:

Political commitment absent.

No solid institutional framework in E,T & N Department.

Less collection of taxes and excise duties than its full potential.

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b) Weak Tax Administration:

Highly politicized, inefficient and corrupt.

Could not set a realistic target and achieve the same.

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c) Weak Base of Own Resource Revenue (ORS):

Tax revenue collection in the province of Sindh is concentrated in a few taxes:

Tax on services 49%. Transfer of property taxes 12%. Infrastructure cess 27%. Property tax less than 2%.

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Source: Finance Department, GoS.

31d) High Administration and Compliance

Costs:

Complex and intricate laws.

Weaker human resources.

Political influences in functioning of E,T & N department.

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e) Poor Efficiency and Equity of Department Taxation:

Tax rates are high and methods of tax collection encourage tax evasion, this is called inefficient taxation.

Taxes equity are also poor i.e. entertainment tax - irrespective of income level.

MVT - engine capacity.

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f) Lack of Institutionalized of IT based business process:

No automation of record keeping and sales transactions in the E,T & N department except for MVT.

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g) No Institutionalized evidence-led tax policy and coordination mechanism:

Presently, no system exists for a structured communication among the three tax collecting agencies e.g. BoR, SRS & E,T & N department.

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h) Lack of tax facilitation centers and tax payer education:

Not a single taxpayer facilitation center.

Similarly, no efforts were made by the department for tax payer education.

36Key Performance Indicators

a. Automation of Record and Services

b. Revaluation of Annual Rental Value ( Property Tax)

c. Impartment of Relevant Skills to Employees

37Key Performance Indicators

d. Development of Field Data base through IT for Professional Tax Collection.

e. Operationalisation of Online Tax payment Mechanisms.

f. Establishment of Swift Tax facilitation Centers.

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Impact Analysis

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SWOT Analysis• Strength

• Collection 0f 41 B of tax

• Efficient in tax collection

• Setup all across Province

•

• Weaknesses

• Manual working in some Departments

• Low motivation level • Poor Infrastructure

• Opportunities

• Proper training to employee

• Full computerized system

• Tax Awareness

• Threats • Security system

• Corruption•Processions or strikes

Year UIP Tax MV Tax Excise Tax Prof. Tax ETD Rev. Prov. Tax Rev.2002 332 1089 674 156 2251 79962003 529 1404 742 158 2833 96792004 599 1636 1160 164 3559 117762005 800 2055 1312 176 4343 136422006 700 2060 1443 184 4387 140352007 800 2300 1650 310 5060 163802008 596 2161 1777 209 4743 156752009 463 2169 2112 222 4966 215622010 839 2964 2948 230 6981 428132011 2139 3193 2577 280 8189 604582012 1907 3327 3102 265 8601 686972013 4000 4880 3300 300 12480 892202014 4800 5160 3825 400 14185 107025

In Rs. Millions. (Source: Finance Department Gov. of Sindh)

0

20000

40000

60000

80000

100000

120000

Rs.

Mill

ion

2000 2005 2010 2015Year

MVT Ttax

Source: Finance Department, Govt. of Sindh.

(Years: 2002 - 2014)Motor Vehicle Tax Revenue vs. Total Provincial Tax Revenue

0

20000

40000

60000

80000

100000

Rs.

Mill

ions

2000 2005 2010 2015Year

UIPT Ttax

Source: Finance Department, Govt. of Sindh.

(Years: 2002 - 2014)Immovable Property Tax Revenue vs. Total Provincial Tax Revenue

0

1000

2000

3000

4000

5000

Rs.

Mill

ions

2000 2005 2010 2015Year

MV Tax Prof. TaxUIP Tax Excise Tax

Source: Finance Department, Govt. of Sindh.

(Years: 2002 - 2014)Comparison of Various Taxes Collected by the Excise Taxation Department

Rs. 6,352 million

Rs. 13,843 million

Rs. 73,643 million

Rs. 36,843 million

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Recommendations

46Refor

m  

Strategy Actions  

Expecte

d Revenu

e

Time frame

Strategic Planning

Strategic direction and operational reforms  

1. Organizational vision

2. Tangible goals3. Action Plan4. Restructuring

   - 

    6 Months

47Reform

 Strategy Actions

 Expected Revenue

Time frame

Property Tax

1. Revaluation of ARV

2. IT based field survey

3. Determination of fair market value

4. Exemptions

1. Procurement of services of an independent firm

2. Survey3. Revaluation4. Amendment5. Linkages

(BOR, SRB)

150%* increase over the next 5 years.

2 year

48Reform

 Strategy Actions

 Expected Revenue

Time frame

Professional tax

1. Rationalization of Tax Rates

2. IT based field survey

3. Sharing of database

1. Third party to conduct survey

2. Linkages

200% increase over the next 5 years.

2 year survey in major cities

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Reform  

Strategy Actions  

Expected Revenue

Time frame

Automation

1. Web portal2. Web based

payment of taxes

   

Through ADP schemes Computerized database already available for MVT

   1 Year

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Reform  

Strategy Actions  

Expected Revenue

Time frame

Human Resource Management

a) HRM and trainingb) Introduce

Taxpayer education and facilitation services

a)Through ADP Schemesb) Training of staffd) Design and operational Tax Campaigns to create awareness and boost voluntary compliance

     

1 Year

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Reform  

Strategy Actions  

Expected Revenue

Time frame

Organizational Development

1. Establish SWIFT Tax Facilitation Centers

2. Performance Audit

3. Formalize IT Management

 

a. Design and build STFCs

b. System of reconciliation / audit will be linked with NBP, AG Sindh & treasury etc.

c. Operationalize the department, develop IT policy and SOPs 

5% each in Motor Vehicle Tax & Property Tax (PKR 250 M)

Model level SFTs at Divisional Level in next 6 months to one year

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Conclusion

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