Number still better than last year’s when 17,314 people filed tax returns. DESIGN: MOHSIN ALAM
Out of 351,091 people who were served notices to submit details of their income and expenditures, just 74,000 responded and filed their tax returns between July 2014 and June 2015, according to the Federal Board of Revenue (FBR) officials.
Out of the total notices, as many as 200,000 were issued by the FBR headquarters, while the remaining were dispatched by the field formations.
These people paid Rs1.11 billion in taxes, either along with the returns or as a result of an assessment by the tax authorities.
When compared with tax demands, the figure appeared paltry, as the authorities had raised the demand worth Rs16.8 billion against these people, according to the officials.
The lukewarm response towards broadening the tax base highlights the lacklustre trend of filing income tax returns. This is partially due to the unfriendly perception of the tax machinery.
To compel people to file income tax returns, the government has imposed withholding tax on banking transactions from July this year, a drive that is facing serious resistance from the business community
However, the results of the second year are comparatively better than the first year of the PML-N government when only 17,314 people had filed tax returns and paid only Rs306 million in taxes.
In fiscal year 2013-14, the FBR had issued 120,350 first tax notices to people who had a lavish lifestyle but contributed almost nothing to the national exchequer.
The government is issuing tax notices under a condition imposed by the International Monetary Fund (IMF). The IMF is pushing Pakistan to crack down against tax evasion. There are only 923,000 income tax filers in the country including 74,000 who filed their returns in the last one year.
The officials said the FBR was in process of building its database. The FBR has gathered details of 5.3 million people who are not income tax filers but conducted various transactions, mainly related to property, motor vehicle procurement, and international travel.
Questions have also been raised over the actual number of taxpayers in the country. International lending agencies treat taxpayers who file income tax returns as registered taxpayers. The government has imposed 67 types of withholding taxes and as many as 83 million people have paid these taxes in the previous year.
Under the income tax law, anybody who files the income tax return or pays tax in any form is a taxpayer. According to this definition, over 43% of the population is paying taxes, mainly in shape of withholding taxes.
There are 2.8 million commercial and industrial electricity connections in the country. The government is charging advance income tax from these 2.8 million consumers but only 475,000 are filing income tax returns. For instance, in Karachi, there are 441,000 industrial and commercial electricity connections but only 125,000 are filing returns.
Similarly, in Lahore, there are 427,000 commercial and industrial connections but less than one-third of them file income tax returns. One could argue that these people are paying less than the amount they should contribute but are taxpayers nonetheless.
Similarly, the FBR deducted Rs35 billion in withholding tax from 30.5 million account holders on account of profit on debt. Under the Income Tax Ordinance, these people are taxpayers, irrespective of whether they file income tax returns or not.
The government is also charging advance income tax from mobile phone users and the FBR’s assessment shows that at least 50 million of them are paying taxes. Similarly, people are also paying advance income tax on purchase of cars.
Income tax returns give the FBR a chance to assess real wealth of the filers. However, due to its weaknesses, the FBR is unable to catch people who understate their wealth and assets, negating the purpose of income tax return filing.
Published in The Express Tribune, August 21st, 2015.
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