Income tax representational image. PHOTO: FILE
These notices have been issued by the Directorate General of Broadening of Tax Base wing of the Federal Board of Revenue (FBR). But the wing has a presence in only three cities and its mandate is limited to unregistered persons, according to official sources.
There are over three million registered persons who are still non-filers of the income tax returns. The wing cannot go after them. The FBR’s operations wing is responsible to go after these registered people but its workforce is preoccupied with the key function of achieving the monthly revenue collection targets.
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A significant majority of the identified High Net Worth individuals belong to areas that do not fall under the federal government’s tax jurisdictions. For instance, out of 220 identified cases picked for sending notices in the second badge, about 75 reside in Azad Jammu & Kashmir and tax exempted federally and provincial administrated tribal areas.
Like the Panama Papers episode, the tax notices have again been sent on the basis of incomplete information. The notices have been sent to addresses like ‘Aziz Shaheed Road’, without mentioning home or street address.
The FBR on Monday did not inform Finance Minister Asad Umar about these operational difficulties during his maiden visit to FBR headquarters. The FBR’s spokesman was not available for comments.
As of October 10, only 482,000 people filed their income tax returns for the income earned in the last fiscal year. The poor show forces the FBR to give two months extension in the date of filing.
At the beginning of this month, the FBR started civil proceedings by serving tax notices to tax dodgers under Section 114 (4) and 116 of the Income Tax Ordinance.
The FBR said these people have purchased properties of over Rs20 million or cars of 1,800cc or above, or have received rent to the tune of Rs10 million or more in a year.
Out of 340 cases, about 185 notices were sent in the first phase and remaining notices were sent in the second phase. Due to incomplete addresses, the courier company could deliver 90 notices out of 185.
The notices have been sent on the basis of collected data from a number of third-party sources. But specific details in all these cases are missing, the sources said.
In the second badge, the FBR authorities identified 83 rental income cases but only two of them were unregistered persons and fall under the domain of the tax broadening wing.
The FBR’s Directorate-General of Broadening of Tax Base has been provided legal cover under section 230-D of the Income Tax Ordinance. But its powers and jurisdictions are regulated through notification in the official gazette.
The Commissioner Broadening of Tax Base is stationed in the FBR headquarters and has powers to only send notices. Subsequently, the concerned Regional Tax Offices are supposed to follow up the notices according to their jurisdictions.
The broadening wing has presence only in Lahore, Karachi and Islamabad. Out of 185 notices sent under the first badge, 60 pertained to these three cities. But there was no bifurcation between the registered and unregistered persons, overlapping the work of the broadening base wing and the operations wing.
In order to make the scheme successful, the government needs to give administrative powers to the Broadening of the Tax base wing. The government should also set up the wing in all the regional and large taxpayers units.
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The findings of the Tax Reforms Commission showed that the data available with the FBR is of extremely poor health. The commission has also proposed to the government that for the next five years, the FBR should deploy 50% of the workforce to territorial jurisdiction for broadening the tax base to take concrete measures.
It recommended that the Large Taxpayers Units should continue to function on a functional specialised system with stronger IT support. But for the next five years, field units for the remaining taxpayers and potential taxpayers should revert to territorial jurisdiction based set up with the main function of these field units being broadening the tax base.
The TRC noted that various measures taken in past by the FBR for increasing the tax base have fallen short of the expectations. The FBR cannot just wish to broaden the tax base and serious efforts have to be made by committing human resources and other necessary resources, it added.
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