Blaming the FBR but not ourselves for not paying taxes

Before you cast your stone at the FBR, many of the issues we face are due to the collective refusal to pay taxes.

Shehbaz Sharif, former prime minister of Pakistan, in his first speech to the National Assembly after being elected on April 11, 2022, said,

“The FBR is a toothless tiger. It is unable to collect taxes from the rich and powerful.”

Aitzaz Ahsan, former attorney general of Pakistan, in an interview with BBC Urdu on February 25, 2021, said,

“The FBR is a dysfunctional organisation. It is riddled with corruption and inefficiency.”

Rana Mashood, former finance minister of Pakistan, in an interview on December 15, 2020, said,

“The FBR is a black hole. It swallows billions of rupees in taxes every year, but very little of it reaches the treasury.”

Are these comments about the Federal Board of Revenue (FBR) true? Is FBR really a dysfunctional, corrupt institution, or a toothless tiger or a black hole? Let's take a closer look.

The FBR has faced a number of challenges in recent years, including political interference, corruption, and a lack of resources. These challenges have made it difficult for the FBR to collect taxes effectively, particularly from high-income earners. A lack of resources is a major challenge that all government agencies face in Pakistan, and the FBR is no exception.

The FBR has introduced Section 4C of the Income Tax Ordinance, 2001, as a super tax on high-income earners. The super tax ranges from 1% to 10% of income, depending on the income slab, with taxable income of more than Rs150 million for the tax year 2022 and onwards. The super tax will ensure that high-income earners pay their fair share of taxes, which will help to reduce the budget deficit, lessen the burden on the poor, and improve the economy.

Dear fellow Pakistanis, I am writing to you today to clear up these misconceptions about FBR. From my experience interning at the regional tax office in Sahiwal, I found the staff supportive, hardworking and dedicated to their jobs. The FBR is a vital organisation that plays a key role in the Pakistani economy. It just wants to make sure that everyone pays their fair share of taxes, which is essential for the country. If you are honest and compliant with the law, you have nothing to fear. The FBR is committed to fighting corruption and has a zero-tolerance policy. The organisation strives to be transparent and accountable by publishing annual reports and making its data available to the public.

The Self-Assessment Scheme (SAS) and tax evasion

The SAS is a system introduced to allow taxpayers to assess their own tax liabilities, which reduces the need for extensive interaction with tax officials. However, this also means less scrutiny of the tax returns, which has led to underreporting of income and tax evasion. This deprives the government of much-needed revenue. Due to the way the SAS plan has been utilised to escape taxes, corruption has increased. People are more prone to partake in other illicit acts like bribery when they don't pay their taxes. This undermines the rule of law and makes it difficult for the government to function effectively.

A recent report by international research body Ipsos has revealed staggering levels of tax evasion in five key sectors of Pakistan's economy: real estate, tobacco, tea, pharmaceuticals, and the automobile industry. The report found that the real estate sector is the largest culprit, with tax evasion amounting to Rs500 billion annually. The tobacco industry is second, with Rs240 billion in lost revenue. The tea sector, pharmaceutical sector, and automobile sector also saw significant levels of tax evasion, with Rs45 billion, Rs65 billion, and Rs106 billion lost, respectively.

How can we hold FBR accountable for being a dysfunctional toothless tiger when we are the ones at default?

Paying taxes is not a burden but a privilege and an act of patriotism. Patriotism is often associated with supporting the military or waving the flag. But there is another important way to show patriotism: by paying taxes to support your country’s running. When we pay our taxes, we are not just giving money to the government. We are helping to make it a better place for everyone. We are not only fulfilling our civic duty, but we are also investing in our future. We are showing our support for the principles of democracy and freedom. We are helping to create jobs and boost the economy.

Pakistan is our home. It is the place where we were born and raised. It is the place where we have our hopes and dreams. But our home is in danger. We are at a crossroads. We can continue down the path of destruction, or we can choose to build a better future for ourselves.

So next time you feel patriotic, don't just wave the flag. Pay your taxes. It is one of the most important things you can do for your country.

Together, we can make a difference and create a great nation. The choice is ours.