Karachi violence makes March tax target difficult to meet

Published: March 30, 2012

A senior official of the Federal Board of Revenue (FBR) told The Express Tribune that on the first day of violence they collected Rs1.2 billion in taxes from Karachi, which was Rs12 billion less than the collection made on the same day last year.

ISLAMABAD: As violence in Karachi entered the third day, the federal government has suffered revenue loss of Rs18-20 billion, which is likely to cost it the tax collection target for March.

A senior official of the Federal Board of Revenue (FBR) told The Express Tribune that on the first day of violence they collected Rs1.2 billion in taxes from Karachi, which was Rs12 billion less than the collection made on the same day last year. On the second day, tax collection was a mere Rs2.5 billion.

The unrest, triggered by killings of political workers, has jammed commercial wheel in the industrial capital of the country.

Against the monthly tax target of Rs174.6 billion, officials managed to bag Rs132 billion up to March 28, the official said.

For the current fiscal year ending June 30, the government has set Rs1,952 billion tax target. So far, it has collected Rs1,240 billion, which is less than two-third of the annual target, and needs to collect Rs712 billion in the remaining around three months.

No campaign to net 700,000 tax evaders

In sheer embarrassment for economic managers, the FBR chairman told the finance minister here on Thursday that there was no campaign to net 700,000 tax evaders, sources told The Express Tribune.

The abandoning of the campaign has put the economic team in an awkward position since it has been presented as the government’s key strategy to broaden the tax base.

According to sources, FBR Chairman Mumtaz Haider Rizvi, in a meeting of the Tax Reforms Coordination Group, gave the remarks when Planning Commission Deputy Chairman Dr Nadeem ul Haque repeatedly asked about the outcome of the campaign.

In his defence, Rizvi asked the finance minister to call the National Database and Registration Authority (NADRA) chairman who actually gave the “slogan”, which was “blindly” followed by the top economic managers.

Last year, the government had planned to bring 700,000 “rich tax evaders” into the net in the hope of raising an additional Rs70-80 billion in revenues. A year on, only Rs700 million has been collected from 66,000 respondents, out of 457,400 who were sent notices.

According to officials of the Directorate General of Intelligence and Investigation of the FBR, NADRA claimed that it had evidence of 700,000 people who were residing in posh localities and owned multiple bank accounts, but did not pay taxes. However, when officials started monitoring these people, they found that the “figure was a hoax”.

Crackdown

Meanwhile, the intelligence and investigation wing has launched a crackdown on high tax evading sectors – cigarettes and beverages. It raided offices of a cigarette distributor in Lahore and unearthed duty evasion of Rs100 million, said an official of the FBR.

In another case, tax officials unearthed a massive tax evasion by a bottler of an international beverage brand. The bottler was calculating 100% advertisement charges in the cost of production while actually it was claiming 17% of advertisement charges from the multinational company.

Published in The Express Tribune, March 30th, 2012.

Reader Comments (5)

  • Hafiz Shah Ali
    Mar 30, 2012 - 9:33AM

    The 700,000 potential tax payer figure was a “bogey” and imaginary number to please the donors. Infact this year about 35% less persons have filed returns as compared to last year.

    What FBR should do is spend next two years in enforcing the provisions of Income Tax Ordinance 2001 and broadening the tax base and leave the tax audit etc unless they have definite third party information of tax evasion..

    The current years tax target was un-realistic from day one: imagine LTU Karachi being asked to collect 40% more tax then last year with same number of tax payers?. It is just not possible with rate of growth in GDP at 3%

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  • Anserali Khan
    Mar 30, 2012 - 3:51PM

    Who should the nation trust?. It seems FBR evidently gave wrong figures of 7,00,000 potential tax payers.
    Very disappointing…….

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  • papoo
    Mar 30, 2012 - 10:24PM

    why should Karachites have their tax spent elsewhere? Tax collected from Karachi should be spent on Karachi, not spent on building some freeway in Lahore or a flyover in Multan etc.

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  • gp65
    Mar 31, 2012 - 4:54AM

    @papoo: “why should Karachites have their tax spent elsewhere? Tax collected from Karachi should be spent on Karachi, not spent on building some freeway in Lahore or a flyover in Multan etc.

    When you talk about tax collected from Karachi, please know that this is not income tax paid by Karachi citizens. In all of Pakistan only 1.5 milion people pay income tax, so hat number is miniscul;e. The bulk of the tax tat Karachi claims is because company headquarters aere in Karachi. So even though manufacturing maybe in Punjab and customers who pay for the products maybe in all provinces, the profits ae recognized in the head office which pays the tax.
    Secondly, if Karachi tax only goes to Karachi residents, please say where the army expense should come from, where expense of debt servicing of national debts come from. If Balochistan said that gas should only go to Balochistan instead of all provinces. If Punjab said there grains should only feed Punjab so that they can get cheaper rather than goingt o all parts of country – would Karachi be Okay wth that? No. What you are proposing is only feasible if Karachi is a country all by itself.

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  • gp65
    Mar 31, 2012 - 5:03AM

    @Author :
    @Author ” “As violence in Karachi entered the third day, the federal government has suffered revenue loss of Rs18-20 billion, which is likely to cost it the tax collection target for March.

    A senior official of the Federal Board of Revenue (FBR) told The Express Tribune that on the first day of violence they collected Rs1.2 billion in taxes from Karachi, which was Rs12 billion less than the collection made on the same day last year. On the second day, tax collection was a mere Rs2.5 billion”

    The logic of how the 20 billion revenue loss is ascribed to Karachi strike is incorrect. The fact that people may not have had a chance to pay tax on that specific day does not mean it is a permananet revenue loss. They may simply pay itlater. in other words collection is only delayed. The only true revenue loss would be the specific losses attributable to violence which may reduce the profits of companies paying taxes. The data provided here does not give any insights into what that number might be.

    @Author: “Against the monthly tax target of Rs174.6 billion, officials managed to bag Rs132 billion up to March 28, the official said”.

    The tax authorities are 40 bilion short of their Marcht tax collection targets of which only 20 bilion (according to this article) can be ascribed to the bandh). So the remaining gap of 20 billion is not explained.

    @Author : “For the current fiscal year ending June 30, the government has set Rs1,952 billion tax target. So far, it has collected Rs1,240 billion, which is less than two-third of the annual target, and needs to collect Rs712 billion in the remaining around three months”.

    It looks like the total short fall is going to be way bigger than the 20 billion ascribed to the Karachi problem (incorrectly in my opinion). Also much bigger than the 40 billion deficit in March. So it is incorrect to associate the Karachi strike to the overall revenue collection deficit.

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