FBR declares war against tax evaders

Defaulters use political connections to pressurise tax officials.

ISLAMABAD:

The tax machinery would go all out against the biggest tax evaders of the country, who have started using political connections in a bid to escape the fast tightening noose around them, as the Federal Board of Revenue (FBR) is fighting a war for its very existence, said FBR Chairman Salman Siddique.

Unveiling his plan to target 700,000 tax evaders, the richest among the identified pool of 2.3 million, Siddique said he has conveyed to the political leadership that “the FBR is a closed territory for intrusion”. He disclosed that those evaders, who have received notices for evading taxes, have started using political connections to pressurise him.

“Time for make and break has come and the FBR has to deliver now, as the tax gap has widened to 79 per cent of the total tax collection,” he added.

The FBR is marred by allegations of corruption and inefficiency, leaving economic managers with the only option to finance soaring expenditures by borrowing money.

For next year, the FBR is trying to meet its “ambitious target of Rs1,952 billion” by catching tax dodgers and withdrawing exemptions instead of levying taxes on new areas. He said that according to conservative estimates, Rs50 to Rs70 billion could be recovered from the 700,000 tax evaders.

He said the mother of all ills – the budget deficit – will be tackled through revenue mobilisation and netting the evaders is very crucial for this plan. People have started calling for disbanding the FBR and creating a new institution on the lines of State Bank of Pakistan. The chairman said that this “is not the solution.”

Tax audit to cover every sector

For improving tax collection, the FBR has planned a centralised audit which will be expanded to each and every sector. Siddique said the FBR has also started post-refund audit, as it has given Rs40 billion worth of refunds this year.

The FBR would also hold a second computerised balloting for the audit of individuals and corporations before September. Tax officials are preparing a risk profile for the audit which would be completed by July and within 30 days balloting would take place. The FBR had held its first computerised balloting in fall 2009.

Old tax evasion cases to be opened

Siddique said so far Rs42 billion worth of demand has been raised on the basis of risk-based audit and out of this Rs3.4 billion has been recovered. He said scrutiny of all withholding agents with special focus on banks, restaurants, utility companies, airlines and courier service providers has already started.

Only in the banking sector, the FBR has unearthed Rs19.1 billion short deductions. A major boost for the FBR was the Supreme Court’s decision which allowed it to open five-year and older cases of withholding agents. He said Rs131 billion worth of tax cases are stuck in the Supreme Court despite the lapse of the six-month stay order.

Siddique said fiscal year 2011-12 revenue measures are based on the philosophy of reducing tax rates and bringing an end to multiple tax bases. This has been done by lowering the sales tax and abolishing the special excise duty, he added.

He said the process of rationalisation of regulatory duties would continue even during the course of the year and the government may implement the recommendations of the Planning Commission study that has called for a drastic reduction in duty rates.

Published in The Express Tribune, June 7^th, 2011.