Tarin’s confidant made chief of tax committee

Finance Minister Shaukat Tarin has appointed his decades’ old friend and associate Aneeq Khawar as chairman of businesses integration committee to steer his largest initiative for online integration of 500,000 retail machines with the tax machinery.

Khawar who had been informally working with the Federal Board of Revenue (FBR) after Tarin became minister has now been given an official assignment. He is the second confidante of Tarin who has been inducted in his cabinet. Earlier, Faek Sadiq was inducted as “consultant” of the finance ministry.

The minister has assumed his official duties after undergoing a stent implantation procedure during Eid holidays. In order to rapidly increase tax revenues by adding new taxpayers via extensive and innovative use of technology, the FBR has issued a notification for the constitution of a Committee for Integration of Businesses which has been formed by the federal minister for finance and revenue, according to a statement issued by the FBR.

Khawar has been appointed as the chairman of the committee and he will report directly to the minister for finance and revenue in his capacity as chairman of the apex committee, said the FBR. Khawar had refused to work under the FBR and instead sought a more prominent position to have meaningful say in the system.

The FBR said that Khawar will work closely and in collaboration with members and key staff of FBR and major stakeholders in the private sector.

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Khawar is a long-time associate and friend of the finance minister and has worked with him in Habib Bank Limited and Union Bank. He is also credited for the success of Kon Bane Ga Crore Pati scheme (who would become a millionaire) that had been launched by the HBL in 1990s to attract private bank deposits.

Tarin also wants to launch a similar scheme to integrate retailers with the tax system and expand the tax base by encouraging people to buy goods only from those retailers that are integrated with the FBR online system. The government is expected to launch the scheme on August 15 and first draw will be announced by the finance minister.

The FBR notification, drafted by Khawar, stated that the Ministry of Finance and the FBR were making concerted efforts to rapidly increase tax revenues by adding new taxpayers via extensive and innovative use of technology.

The PTI government has been struggling to expand the tax base and its progress during the first three years remains less than satisfactory, as all claims to bring five million to seven million taxpayers in the net fall flat.

An FBR handout of July 1 stated that as of fiscal year 2020-21 end, income tax returns for tax year 2020 have reached 3.01 million compared to 2.7 million in tax year 2019, showing an increase of 12.5%. Effectively, less than 350,000 new taxpayers could be brought in the tax net.

The finance minister, earlier this month, showed his unhappiness over a briefing about the real potential of broadening the tax base. The finance minister was informed that out of 7.2 million identified people majority of them had little tax potential. The minister was also briefed about difficulties in bringing these people in the tax net.

The 7.2 million potential taxpayers had been identified after retrieving available data of their withholding taxes through third party sharing but only 312,000 could be brought in tax net.

The finance minister wants to connect 500,000 point of sales with the FBR system and collect Rs100 billion taxes from the retailers in two years. But the progress, so far, remains painstakingly slow. In July, the FBR had registered 84 more retailers, taking total number of point of sales that are linked with the FBR network to 11,514.

Against these 11,514 machines, the actual number of retailers who are linked with the FBR are 1,016, including 660 tier-I retailers.

The FBR has already informed the finance minister that there was no huge tax potential from the drive and the FBR at best can collect additional Rs15 billion from the POS initiative in the current fiscal year as against the budgeted figure of Rs50 billion.

But Tarin believes that the Rs100 billion and 500,000 POS target can be achieved.

At the end of the last fiscal year about 11,000 POS had been registered year that paid Rs14 billion in taxes, which was actually Rs500 million less than the last year.

Published in The Express Tribune, July 28^th, 2021.

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