Finance Minister Asad Umar. PHOTO: PTI
ISLAMABAD: The Pakistan Tehreek-e-Insaf (PTI) government is failing in its two key goals - broadening a narrow tax base and enhancing revenue collection, which has started displeasing Finance Minister Asad Umar who on Thursday sought an explanation for apparent breakdown of the tax machinery.
Umar expressed dissatisfaction over the Federal Board of Revenue’s (FBR) performance in the tax broadening campaign and revenue collection in first four months of the current fiscal year, said sources in the FBR headquarters.
They said the minister rejected the excuses given by taxmen during a visit to the FBR headquarters before departing for China.
The PTI government has promised that it will double tax collection and widen the narrow tax base, which currently comprises only 1.4 million active taxpayers. As part of its campaign, the FBR has started sending notices to the non-filers of income tax returns.
But the government’s drive to target the big fish has started backfiring. These notices have been issued by the Directorate General of Broadening the Tax Base on the basis of data provided by the FBR’s Operations Wing.
Of the 373 notices sent in the first phase, about 145 could not be delivered due to wrong addresses, said the sources. So far, only 19 people have filed tax returns after receiving the notices.
The sources added that the finance minister was unhappy with the progress, but the FBR assured him of producing tangible results by the end of November.
The FBR is serving notices to the tax dodgers under Section 114 (4) and 116 of the Income Tax Ordinance. “These people have purchased properties of over Rs20 million, cars of 1,800cc or more engine capacity or have received rent to the tune of Rs10 million or higher in a year,” said the FBR.
Different FBR wings were not effectively coordinating with each other and there were complaints about lack of automatic data sharing by the information technology wing of the authority, the sources said.
Umar visited the FBR headquarters a day after Minister of State for Revenue Hammad Azhar boasted on Twitter that the government had entered the fourth phase of the drive against non-filers of income tax returns.
“Data relating to more than 2,500 cases of purchase of expensive properties, vehicles and receipt of high rental income by non-filers has been handed over to the relevant FBR field offices for perusal,” added the tweet.
The FBR sources said the finance minister also expressed displeasure over the shortfall in tax revenues. The FBR was able to collect Rs1.1 trillion in taxes in first four months of the current fiscal year and fell short of the target by Rs100 billion.
The growth in revenue collection in the four months was less than 7% while October’s growth was a meagre 1%.
The minister did not accept the reasons provided by the FBR for the shortfall in tax receipts. He was of the view that the targets had been given while taking into account all the factors that the FBR was now blaming for the shortfall, the sources said.
The minister asked the FBR chairman to justify the reasons for the low receipts before Prime Minister Imran Khan during a meeting next week.
Reasons for decrease in tax revenue
The FBR blamed the shortfall on slowdown in the economy, income tax relief given to the salaried class and contraction in taxable imports due to heavy regulatory duties. The slow release of funds for the Public Sector Development Programme also affected the FBR’s tax collection from contractors.
The Supreme Court’s decision to stop the FBR from collecting advance tax on mobile phone calls and reduction in sales tax on petroleum products also impacted the tax collection, according to the FBR authorities.
The sources added that the finance minister wished to enhance collection through administrative means while the FBR still wanted to rely on policy tools to enhance the collection.
The minister also directed the FBR to release nearly Rs15 billion in tax refunds where payment orders had been issued.
Published in The Express Tribune, November 2nd, 2018.
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