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31.07.2017

Germans and Pakistanis love Value Added Tax

The German Federal Länder System provided ideas for the application of tax principles, mechanisms to reduce tax evasion, measures for deepened harmonization between administrative levels and financial equalization.

Christian Kapfensteiner, GIZ

The Support to Local Governance Programme (LoGo) implemented by GIZ on behalf of the German Federal Ministry of Economic Cooperation and Development (BMZ), conducted a three day international learning seminar on sales tax, which is a modified version of VAT, for Revenue Authorities from all four Pakistani provinces as well as a delegation from the Taxation Division of the Ministry of Finance, Hamburg, Germany. The event took place in Islamabad from the 9th to the 11th of May 2017 and was organized on the back of a study tour of Pakistani tax officials to Germany, arranged in December 2016 in collaboration with the Advisory Fund for Structural and Regulatory Policy Reforms (Struktur- und Ordnungspolitischer Beratungsfonds zur Reformgestaltung, SOB).

The German tax officials, Mr. Olaf Paulsen and Mr. Stefan Harmuth, presented the system utilized by the German Federal-“Länder” and the European Union (EU) for the administration of VAT. The Pakistan Provincial Revenue Authorities made presentations on their organizations and ongoing reforms. Ms. Stefanie Rauscher, a planning expert from the GIZ head office, presented GIZ’s experiences to improve taxation systems in a number of countries around the world.

Presentations and deliberations led to a common viewpoint on the need for inter-provincial coordination among the stand-alone Pakistani Provincial Revenue Authorities. Lessons drawn from the EU VAT system, which proved to have similarities with the Pakistan Provincial Sales Tax structure, included legal aspects as well as different mechanisms of coordination and exchange between national and provincial regulators. The German Federal Länder System provided ideas for the application of tax principles, mechanisms to reduce tax evasion as well as measures for deepened harmonization between administrative levels and financial equalization. The tax officials from Germany were on the other hand impressed by the implementation of a “Restaurant Invoice Monitoring System“ (RIMS), which allows for real time monitoring of sales.

As a result of the seminar, all four Pakistani Provincial Revenue Authorities held – for the first time - a joint meeting on 21st May, 2017 to resolve the long standing issue of equal sharing of revenues from cross-border transportation of petroleum products. GIZ`s LoGo programme will continue to support the Revenue Authorities in the institutionalization of an inter-provincial coordination and exchange mechanism.

Region: Pakistan
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