Curbing tax evasion: Govt likely to miss key IMF loan condition

FBR has so far failed to raise tax demands against three out of four tax evaders.

ISLAMABAD:

The government has so far failed to raise tax demands against three out of four tax evaders who were served with notices but chose to keep themselves out of the tax net, making it likely to miss a key condition of the $6.7 billion International Monetary Fund (IMF) bailout programme.

Under one of the conditions imposed by the IMF on the loan, the Federal Board of Revenue (FBR) had to serve tax notices to 75,000 tax evaders and send follow-up notices to at least 75% of those who failed to provide a satisfactory response to the first notice within two months of its issuance. The exercise is to be completed by the end of March 2014, IMF documents stated.

By the end of January, however, the FBR served tax notices to 70,000 tax evaders and received tax returns – along with Rs50 million in taxes – from only 10% of them, data compiled by the bureau’s Broadening of Tax Base desk showed.

According to the data, the tax machinery was able to issue only 9,400 second notices – less than 15% of those who were served the first tax notice. Out of these, the FBR has raised tax demands against over 5,000 people, a bureau official said. He added that the figure would increase significantly in coming months.

The campaign to raise tax demands was also damaged by FBR’s inability to deliver notices on the addresses of tax evaders, the official said.



“Less than half of the total 70,000 first notices could be delivered to potential evaders,” he told The Express Tribune. He added that along with using courier services, the bureau headquarters dispatched around 17,000 notices to its field formations for delivery, but officials concerned handed over less than 4,000 of them.

The FBR official said the bureau has contacted the National Database Registration Authority (NADRA) to facilitate the delivery of notices.

The two bodies, however, are not currently enjoying cordial relations as Finance Minister Ishaq Dar declared NADRA’s data of potential tax evaders ‘flawed’. Some months back, FBR’s Member Facilitation and Taxpayers Education Riffat Shaheen Qazi questioned the authenticity of NADRA’s data as well, but that cost her official spokesperson’s seat.

The FBR is so far using its own data, instead of the information available with NADRA, as the base to serve tax notices. But experts are skeptical about the bureau’s databank, which was never reliable and authentic due to deep-rooted corruption in the Pakistan Revenue Automation Limited, the FBR subsidiary which handles the data.

FBR’s inability to meet one of the key structural benchmarks of the IMF programme highlights both resistance towards broadening the tax base within the tax machinery and the lack of a tax culture in the country. The Pakistan Muslim League-Nawaz government’s blanket tax amnesty scheme offered to billionaires has also dented efforts to broaden the tax base.

Lawmakers’ taxes

Several lawmakers too, it seems, are least concerned about paying their taxes.

Until February 7, over 700 out of the 1,172 members of the National Assembly, Senate and the four provincial assemblies submitted their tax returns, according to FBR’s Senior Member Inland Revenue Police Shahid Hussain Asad. About a third of them did not comply with the deadline.

Asad, however, said the FBR HQ was collecting information from field formations and the figure was expected to go up.

Finance Minister Ishaq Dar announced his ministry will make the tax directory of legislators public by February 15, after criticism against tax evasion by lawmakers mounted.

Published in The Express Tribune, February 8^th, 2014.