FBR awaiting green signal to chase tax evaders

Govt reluctant to give tax authorities green signal to crack down on 700,000 tax evaders.

ISLAMABAD: The government is reluctant to give tax authorities the green signal to crack down on 700,000 tax evaders, even at a time when there is a shortfall in revenue collection.

The February tax collection target was missed by a margin of Rs27 billion mainly because of a 10 per cent drop in direct tax collection, according to provisional statistics released by the Federal Board of Revenue (FBR). FBR managed to collect Rs103.1 billion in taxes against the target of Rs130 billion.

The shortfall is almost equivalent to what the government wants to collect by promulgating a new ordinance. The government is considering levying flood surcharge and doubling special excise duty rate in the ordinance to boost tax collection.

Total tax collection in the first eight months of the current financial year (July-February) stood at Rs873.2 billion, a shortfall of Rs34 billion. Hence, the tax authorities are now facing an uphill task to collect Rs757 billion in the remaining four months. The FBR needs to collect an average Rs189.3 billion per month to achieve the target, which is “over-ambitious” according to a former FBR chairman.

FBR Chairman Salman Siddique said his goal “is to achieve the year-end target of Rs1.63 trillion by all means.”

Statistics show that from the Rs873 billion collection, direct taxes were Rs309.4 billion, which is just 35.4 per cent of the total collection. A member of FBR said that the shortfall in income tax collection was Rs16 billion, indicating that something was wrong with the audit and income tax wings of FBR.

The international community has largely stopped loan disbursements due to the government’s inability to implement reforms. The budgetary support by the international community dropped to a mere Rs17.9 billion, shows the finance ministry’s fiscal operation summary. The revenue shortfall compels the authorities to borrow from the central bank to finance the budget deficit that further fuels inflation.

On February 23 in a meeting of the Senate Standing Committee on Finance, the FBR chairman said that tax evasions amounted to 79 per cent of total taxes in the country. FBR had credible evidences against 708,600 tax evaders and would launch a campaign to net the evaders from February 25, he added. Only 1.9 million people submit income tax statements out of the registered 2.9 million national tax number holders, a gap of one million.

The plan

“Everything from newspaper advertisements to provisional tax demands against the evaders is ready, but we are waiting for the green signal from the higher authorities,” says the FBR official. The FBR’s plan requires approval of the Economic Coordination Committee (ECC) of the cabinet. ECC did not take up the issue of approving a framework to broaden the tax net in the meeting held on Tuesday.

The authorities have chalked out a plan to collect at least Rs5 billion from the tax evaders during April to June this year. According to details, FBR will give tax evaders a 30-day deadline to submit details of their income and spending through media advertisements and if they don’t, tax authorities will raise provisional tax demands with a two-month deadline to respond. If the people do not even turn up after the two-month deadline, provisional demands will be considered as a final tax liability and after that recovery will start.

FBR has obtained information from the data bank of the National Database Registration Authority (NADRA) while evidence is based on ownership of movable and immovable property, foreign visits and accounts in foreign banks of the tax evaders.

Published in The Express Tribune, March 3^rd, 2011.