Number of sales tax return filers rises only 8%

Marginal increase indicates govt’s reforms initiative is not bearing fruit

ISLAMABAD: The Federal Board of Revenue (FBR) could increase the number of sales tax return filers by only 8% in first six months of the current fiscal year, thanks to 38% increase in the category of filers that did not pay any tax, indicating that the government’s reforms initiative was not bearing fruit.

Only 29.5% of the total sales tax return filers paid taxes while the remaining 70% filed returns either in the “null” or “nil” categories.

The new initiatives looked insufficient to persuade people to file tax returns amid arm twisting by the FBR that created unnecessary controversy due to the raid on a supermarket.

As at the end of December 2019, nearly 158,206 entities submitted sales tax returns, according to FBR’s statistics. There was an increase of 7.7% or 11,284 returns as compared to the June 2019 figure, statistics showed.

However, a deeper look at the numbers showed that the increase was mainly because of 38.4% surge in the filing of returns in the category of null filers - the business entities that are not active for a long period and not doing business.

In June 2019, 61,367 entities had filed null returns - a figure that has now jumped to 84,959. About 26,536 filed sales tax returns by December 2019, showing nil sales, which was down 36.2% as compared to the June 2019 level.

Only 46,711 entities filed returns and paid any tax as of December 2019, up 2,769 or 6.3% as compared with June 2019.

In June last year, FBR Chairman Shabbar Zaidi had announced that the revenue board would bring 3.1 million commercial consumers of electricity and 300,000 industrial consumers in the tax net besides making it compulsory to produce Computerised National Identity Card (CNIC) on purchases of over Rs50,000 worth of goods.

The FBR, however, kept suspending the CNIC condition till January this year.

To a question about low filing of sales tax returns during the meeting of a National Assembly panel, FBR Member Operations Inland Revenue Seema Shakil stated that the decision to double the exemption limit for sales tax registration from Rs600,000 to Rs1.2 million worth of annual electricity bill led to the low filing of returns.

The FBR also witnessed 12% reduction in the filing of income tax returns in tax year 2019. Around 2.5 million taxpayers filed income tax returns, which were only 40% of the people who had the National Tax Number.

Through the Finance Act 2019, the government had introduced measures in the Sales Tax Act 1990 to increase sales tax registration and return filing.

Zaidi told The Express Tribune a few months ago that his analysis of 35 sectors from July 2014 to March 2019 revealed that about 40% of total sales of these sectors were to unregistered persons, which was causing evasion of both income and sales tax.

Despite having this information, the FBR was not able to significantly enhance sales tax registration in the country.

In major cities like Karachi, there were about 14,600 registered sales tax persons who paid taxes. In Lahore 13,700, Faisalabad 4,570, Peshawar 1,060, Islamabad 2,900, Rawalpindi 2,550 and Quetta 490 sales tax persons made payments, according to statistics compiled by the FBR.

The FBR continues to overburden the existing taxpayers with more taxes and by not making due tax refunds and conducting raids.

This week, the FBR sent its team to monitor sales at a supermarket, which turned into an ugly incident. Consequently, the FBR had to take an undertaking from family members of a senior partner of the supermarket that his death was not the result of the FBR’s inspection.

The FBR sent a team of six people to the supermarket, wanted to post their people at the checkout points and monitor their daily sales and purchases along with seizing all documents.

Soon after the raid, the senior partner of the supermarket died, which panicked the FBR people. The chief commissioner of the Large Taxpayers Unit Karachi-II took an undertaking from the other partners that the death of the senior partner “was the will of Allah”.

Sources close to the family of the senior partner told The Express Tribune that the FBR pressurised the family members to get the statement. However, the FBR denied that the death was caused by its action.

FBR Member Operations Seema Shakil said she had authorised the dispatch of the monitoring team and took full responsibility for the action.

The raid at the supermarket was not an isolated arm twisting move by the LTU Karachi-II. This week, it has also frozen bank accounts of a company to recover Rs140 million.

Zaidi, however, had barred the FBR from freezing bank accounts of taxpayers.

In a clarification issued by the FBR, the authority claimed that its officers were not harassing traders in Karachi.

Published in The Express Tribune, March 7^th, 2020.

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