FBR recovers Rs13.5 billion from tax dodgers

Its enforcement, tax net widening drives pick up pace amid criticism

Shahbaz Rana March 28, 2019

ISLAMABAD: The Federal Board of Revenue (FBR) has managed to recover Rs13.5 billion in over 11,000 cases through its enforcement and tax net broadening campaigns as these drives pick up momentum amid stiff resistance from the business community.

“Recoveries have been made on account of enforcement actions, recovery of undisputed tax arrears and drive against high net-worth individuals,” said Hammad Azhar, Minister of State for Revenue.

However, the FBR had to pay a price in the shape of criticism by the business community, which fiercely opposed the raids conducted by the FBR.

The development comes at a time when the FBR faces a massive revenue shortfall, undermining the government’s efforts to restrict the budget deficit. The FBR is also struggling to meet its tax collection target for March and has taken numerous measures, but still it is way behind the goal. As of March 25, the FBR could collect only Rs190 billion in taxes.

In the month, the FBR has so far managed to ensure some growth in income tax receipts at the domestic stage, sales tax at the domestic stage and federal excise duty from domestic sources. But its collection at the import stage of these three taxes is shrinking due to squeezing imports. However, there is a decent growth in the customs duty collection.

Of the Rs13.5-billion collection through various drives, the FBR recovered Rs3.8 billion by conducting raids in exercise of powers available under the Income Tax Ordinance and Sales Tax Act.

As a result of these raids, the field formations took action in 424 cases where revenues of Rs8.3 billion were involved. Of these, the FBR recovered Rs3.8 billion.

Various chambers and businessmen have been complaining against the FBR’s drive and have demanded that it stop conducting raids. Later, FBR Chairman Jehanzeb Khan announced a halt to the raids, which may affect results of the campaign.

But an FBR member said the raids would not be conducted only in cases where the businesses responded to tax notices to fulfill their financial obligations. The member clarified that in cases where the businessmen did not respond to the notices, the FBR would have no option but to conduct raids.

Hammad Azhar said the FBR had also recovered Rs8.2 billion in tax arrears in cases where there were no stay orders from courts. The taxpayers did not easily cough up the money and the FBR had to “attach over 4,500 properties and bank accounts besides arresting nine people”.

The FBR froze more than 4,378 bank accounts, seized 78 properties and 46 vehicles, and imposed embargo in one case to recover Rs8.2 billion. These recoveries were made over the past few months, suggesting that the FBR moved only after Prime Minister Imran Khan forced it to take action as the revenue board had failed to perform its basic duties.

“The FBR has also launched a drive against high net worth individuals who have been identified on the basis of their economic activities,” said the minister of state. These cases have been identified by specialised units which have been set up in field formations to go after people who are not in the tax net.

The FBR has so far issued tax notices in 6,451 cases and demanded Rs2.2 billion. It has managed to bring 2,671 people in the tax net and recovered nearly Rs1.4 billion.

This month, the National Database and Registration Authority (NADRA) informed the prime minister that it had picked 2.7 million people who enjoyed a lavish lifestyle but were not in the tax net.

There are less than 1.7 million people who file annual statutory income tax returns. The tax-to-GDP ratio is only 13%, which this year can fall by around one percentage point instead of making any improvement.

Published in The Express Tribune, March 28th, 2019.

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