Government starts issuing notices to tax evaders

Tax dodgers given a month to pay due amount and file wealth statements.

ISLAMABAD: The government on Monday began sending notices to tax dodgers with a one-month deadline to submit wealth statements and pay the due amount or face freezing of properties and bank accounts. The belated step, if executed prudently, may ease the state’s financial woes in the longer run.

The Federal Board of Revenue (FBR) has sent notices to income tax dodgers and sales tax short-filers. The notices have been sent under Income Tax Ordinance 2001 clauses 114 and 116, which stipulate a onemonth deadline for declaration

of total assets and liabilities by the evader, his/her spouse and children as well as transfer of property after receipt of notices and expenditures incurred on him and family.

After one month, authorities will raise provisional tax demands with a two-month statutory period to respond.

Failure to respond will automatically convert the provisional demand into a final tax liability.

Section 114 binds every company and individual to file income tax returns, assuming their annual income is, or exceeds, Rs300,000, while section 116 seeks presentation of detailed wealth statements.

With the help of the National Database and Registration Authority, FBR has been able to identify at least 700,600 people who own more than

one house and moveable property, among other assets, but shy away from becoming registered taxpayers. Currently, there are only 2.9 million registered taxpayers, of which one million are dormant.

According to FBR statistics, Pakistan’s tax ratio in comparison with the total size of economy is the second lowest in the region, followed by Bangladesh. The tax-to-GDP ratio stands at 9.6 per cent.

“The process of sending notices has been started, the headquarters have delivered

notices to all regional tax offices, which will hand them over to the evaders in coming days,” said FBR spokesperson Riffat Shaheen Qazi, while speaking to The Express Tribune.

Notices have also been sent to registered sales tax persons, who paid less than the amount collected from end users. The notices have been sent under section 11A and 26 of the Sales Tax Act 1990. The act authorises FBR to recover short paid amounts along with a default surcharge, “by stopping removal of any goods from his business premises and through attachment of his business bank accounts,” even without issuing a show-cause notice.

The Pakistan Tax Bar Association has supported the government’s efforts to bring non-filers and short-filers into the tax net. Association

Secretary General Rana Munir Hussain said the government’s step was long overdue and urged it to continue with the drive, instead of abandoning it before completion.

Tax authorities face a gigantic task to achieve the revised tax target of Rs1.6 trillion, despite levying new taxes worth Rs53 billion. In the first eight months of the current fiscal year, FBR collected Rs873 billion in taxes, leaving it with a target of Rs731 billion for the next four months.

Despite the imposition of new taxes through presidential orders, achievement of the tax target would require generation of Rs37 billion through administrative measures. Additionally, FBR has estimated recovery of at least Rs2 billion from the 700,600 evaders during the next four months.