Despite host of measures, tax filers increase by just 10,745

Govt offered amnesty scheme, increased tax rates but to no avail

ISLAMABAD: The government’s carrot and stick policy seems to have failed as the number of income tax return filers increased by just 10,745 in tax year 2015.

This comes despite the government offering an amnesty scheme and radically increasing tax rates for non-compliant persons to lure them in the tax net.

Meanwhile, the Federal Board of Revenue (FBR) appears to be in an even more embarrassing situation since the number of companies and Association of Persons (AOPs) filing their annual income tax returns has declined in the tax year 2015.

The entire increase of 10,745 filers came on the back of individuals who filed their returns for tax year 2015 that ended in June last year.

The results also put a question mark over claims of the International Monetary Fund (IMF) that claimed in an October 2015 report that the initiative of broadening the tax base was moving in the right direction.

Under the $6.2-billion programme, Pakistan was supposed to bring in 300,000 additional people in the tax net by serving them tax notices.



The official data that the FBR submitted to a National Assembly panel has exposed the hollowness of the tall claims of the PML-N government, besides putting a question mark over the existence of a strong 21,000-FBR workforce.

The number of income tax filers stood at 1.064 million in tax year 2015 as against 1.053 million of the previous year, according to the FBR.

This was a net addition of only 10,745 people. Data for the tax year 2016 will be available at the end of this year, as the last date for filing the income tax returns for individuals is September 30.

Shocking findings

A closer look of the data suggests that the number of individual filers increased over the previous year but the number of AOPs and companies declined.

Most of these companies are still in business and it is beyond comprehension as to how they are conducting business without filing their income tax returns.

Under the law, it is binding on every person earning over Rs400,000 per annum to file income tax returns.

In a population of about 200 million, only 3.7 million are registered taxpayers in the country. Out of these, only 1.064 million filed their returns during the tax year 2015.

Only around three out of every 10 registered persons filed their income tax returns, putting a question mark over the working of the FBR that has failed to force even registered persons to file details of their incomes and expenditures.



The FBR registered 135,139 more people last year but only 10,745 or 8% of them filed their tax returns, highlighting weak enforcement.

FBR Spokesman Dr Mohammad Iqbal insists that most of these registered people will come in the tax net in tax year 2016.

Out of total 3.5 million registered individuals as of June 2015, only 991,538 filed their tax returns - up by 12,686. A major reason behind increase in number of individuals filing their returns was the government’s decision to give tax amnesty scheme to traders.

As a result of this scheme, 9,090 traders came into the tax net, against the official aim to bring one million.

As against 157,268 registered AOPs, as many as 44,539 AOPs filed their returns - 1,704 less than even the previous year.

Similarly, against the registered 57,186 companies only 28,031 of them filed their returns. As many as 237 companies that were filing their returns earlier became non-compliant in tax year 2015. The FBR did nothing about them.

Non-compliant cost

After coming into power, the PML-N government introduced a policy of two separate tax rates for filers and non-filers of income tax returns. It set significantly higher income tax rates on dividend income, interest income, cash withdrawals, and all kinds of banking transactions and withholding taxes on almost every kind of transaction.

It estimated that these measures would generate extra Rs54.5 billion in fiscal year 2015-16. The FBR’s data revealed that people actually paid Rs85.4 billion, suggesting that they were ready to bear the extra cost but not ready to come into the tax net.

Tall claims

Under the IMF programme, the government launched an initiative to incorporate 300,000 new taxpayers into the income tax net.  An October 2015 IMF report stated that “the authorities met the target of issuing 200,000 first notices to file income tax returns by end-June 2015, to bring more potential taxpayers into the revenue base”.

It had been expected that these people would come in the tax net during the tax year 2015 but at the end of the tax year, only 10,745 came into the net. Pushed by the IMF, the government also launched a scheme to simplify tax processes to encourage people to become filers. This also could not work. 

Published in The Express Tribune, September 18^th, 2016.

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