The budget proposal also includes getting real-time access to the data of provincial land and tax authorities, housing societies and telecommunication companies, sources in the FBR told The Express Tribune.
A rationale behind the proposal was to increase the number of income tax returns and wealth statements being submitted annually by the taxpayers, said the sources.
FBR officials said they had proposed the inclusion of new sections in the Income Tax Ordinance 2001 and Sales Tax Act 1990 to legalise access to NADRA database.
The FBR has been changing its laws but lacks their enforcement, which has resulted in a stagnant tax-to-gross domestic product (GDP) ratio with only 2.5 million income tax return filers.
However, the actual number of people paying taxes runs into more than 50 million due to various kinds of withholding taxes that the government has imposed.
In fiscal year 2019-20 budget, the federal government also introduced the condition of compulsory disclosure of Computerised National Identity Card (CNIC) number on purchases of over Rs50,000 in a day.
Instead of broadening the tax base, the government in November last year gave further relaxation to traders by lowering registration limits for them.
According to the new budget proposal, NADRA, the Punjab Land Revenue Authority, provincial sales tax authorities, housing societies, cooperative housing societies and telecom companies would give real-time access to the FBR.
The FBR believes that people do not fully disclose their assets in wealth statements and also hide their income and sales. It wants to integrate the data to stop tax evasion.
A few months ago, the Federal Tax Ombudsman office raised the issue of tax evasion by housing societies. However, no concrete action could be taken by the FBR.
Interestingly, in June last year, the then FBR chairman, Shabbar Zaidi, claimed that the FBR had got access to information about 53 million people and they would be chased. The information was about their foreign travel and bank accounts but neither the tax collection increased nor the tax base.
As against 2.82-million income tax return filers in tax year 2018, the return filers were around 2.5 million in 2019.
The Pakistan Tehreek-e-Insaf (PTI) government had also claimed that it received information about 152,000 bank accounts from the Organisation for Economic Cooperation and Development (OECD) involving $7 billion. But due to its weak legal and administrative structures, the recoveries amounted to less than $10 million.
The FBR was also confident that banks would share information about withholding tax deduction from June 18, 2019, helping the tax machinery to launch pilot project from July 1, 2019 for broadening the tax base. However, despite the legal base for getting access, the banks have not yet given access to the FBR.
Last month, the FBR decided to close 325,000 outstanding tax audit cases due to its “capacity constraints”, losing an opportunity to bring these people back into the tax net.
Similarly, Her Majesty’s Revenue and Customs (HMRC) of the UK that was providing help to Pakistan on how to use transfer pricing information of MNCs being received under the Country-by-Country Reporting (CBCR) regime of the OECD has also suspended its assistance to Pakistan.
The suspension is likely to dampen prospects of recovering taxes that some multinational companies have evaded or avoided to pay in Pakistan. Pakistan has been receiving information from foreign jurisdictions about such companies under the CBCR regime but it has remained unable to utilise the information, which irritated the HMRC, said the source.
The HMRC was sending expert tax auditors to assist Pakistani authorities in tax audit of multinational companies.
However, the FBR denied that the HMRC pulled out of Pakistan. In an official statement, the FBR stated that the HMRC was currently in discussions with the FBR on details of a new programme of support and has all along been very forthcoming in assisting Pakistan in tax-related matters including its programme “Tax Inspectors Without Borders” (TIWB) and the HMRC has not communicated any suspension of its cooperation, said the FBR.
Published in The Express Tribune, June 6th, 2020.
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