Despite OECD data, FBR fails to increase tax collection

Officials cite weak monitoring, corruption as key reasons behind low receipts

ISLAMABAD: Despite having a treasure trove of information from the Organisation for Economic Cooperation and Development (OECD), the income tax collection with tax authorities' own efforts remained almost unchanged at 7.6% of total direct taxes in first nine months of the current fiscal year.

The Federal Board of Revenue (FBR) received just Rs74.3 billion or 7.6% of total direct taxes with its own efforts from July through March of this fiscal year, showed official statistics.

In first nine months of the last fiscal year, the FBR had collected Rs68.5 billion or 6.6% of total direct taxes through its own efforts.

The remaining direct taxes were generated through voluntary payments by taxpayers and withholding taxes. An amount of Rs274.2 billion or 28% of the total direct taxes was collected on account of voluntary payments. The biggest chunk - 70.2% of the direct taxes or Rs684.6 billion - was collected because of dozens of withholding taxes.

Overall, the FBR collected a net Rs975 billion in direct taxes from July through March 2018-19, down 5.6% or Rs58 billion over the same period of last fiscal year.



Although the collection through the tax machinery's efforts increased Rs5.8 billion or 8.5% over the previous year, it did not correspond with the tall claims of going after tax evaders.

Prime Minister lmran Khan had vowed to make life of tax dodgers miserable by going after them. About two months ago, Minister of State for Revenue Hammad Azhar also said Pakistan had received details of 152,000 bank accounts from 29 jurisdictions under the OECD treaty. He revealed that Pakistan had requested 10 more countries for automatic exchange of information.

But results of first nine months of the current fiscal year suggest that the authorities have not been able to make a major impact despite having treasure trove of information.

Sources in the FBR told The Express Tribune that weak monitoring of withholding taxes, lack of focus on audit cases and ineffectiveness of intelligence and investigation wing of the Inland Revenue were the reasons behind the negligible share of tax collection through FBR's own efforts. The directorate general of broadening of tax base was not effectively playing its role.

In addition to the OECD information, the Pakistan Tehreek-e-Insaf (PTI) government had also claimed that it had actionable information against 2.7 million Pakistanis which had been gathered by tracking their lavish lifestyles.

Although the government has sent tax notices to thousands of potential taxpayers, these are not translating into revenues, the sources added.

They said a key reason for the low tax collection by the FBR's own efforts was massive corruption in the tax machinery where people were found taking bribe from withholding agents for settling demands against them.

Instead of cracking the hard nut, the PTI government is planning to give a tax amnesty scheme to the habitual tax dodgers by going against the party's manifesto to nab the corrupt. There have also been concerted efforts to accommodate real estate and banking tycoons in the new tax amnesty scheme.

The lobbyists working for the real estate sector and bankers have launched a campaign to pressurise the government by circulating a so-called draft of tax amnesty scheme, claiming that it is the FBR's draft.

The purported draft shows the tax rate for real estate tax dodgers will be 1% and banking deposits will be cleared at the closing balance.

If Dr Abdul Hafeez Shaikh-led Q-Block accepts these low tax rates for clearing real estate properties and bank balances, it will put a question mark over the credibility and integrity of the government, said the sources.

"It will be utterly wrong and unjustifiable to clear bank accounts at closing balance," said Dr Ikramul Haq, a renowned tax expert and advocate of the Supreme Court of Pakistan.

Haq said the clearance of bank deposits at closing balance would also be against the accounting principles and tax laws. The inflow and outflow in a bank account must balance, he added.

Haq said it had remained the practice to take the peak balance in a bank account.

The voluntary payments in the first nine months increased due to a surge in advances that the FBR took from July through March of the current fiscal year. Out of total Rs274 billion voluntary tax payments, the advance income tax stood at Rs237.6 billion. There was an increase of nearly 16% or Rs32.4 billion in the advance income tax collection.

The taxpayers also paid Rs36.8 billion along with income tax returns, higher by Rs2 billion or 5.7%, showed the statistics.