Pakistan’s tax chief announced on Friday that the Rs13 trillion tax target is unachievable without bolstering the Federal Board of Revenue (FBR) and revealed that foreign-funded consultants require two and a half years for the complete digitisation of the tax system.
The statements made by FBR Chairman Malik Amjad Zubair Tiwana suggested that neither the Rs13 trillion tax target nor Prime Minister Shehbaz Sharif’s initiative for the complete digitisation of the FBR would be realised soon. Tiwana was speaking at a National Assembly Standing Committee on Finance meeting about the FBR’s performance and future goals, chaired by Syed Naveed Qamar of the Pakistan Peoples Party.
“The target can only be achieved if the government provides us with additional resources,” said Tiwana in response to a question from PPP MNA Nafeesa Shah, without specifying the financial and human resource needs of the FBR. This statement came on Friday, a day before the prime minister’s visit to the FBR headquarters, where he is scheduled to discuss outstanding issues.
For this fiscal year, the government has set a Rs12.970 trillion tax target for the FBR, a 40% increase from last year. Government officials privately admit that this target is unrealistic, even with the imposition of around Rs1.7 trillion in new taxes. Tiwana did not explicitly state that the FBR could achieve the new target.
To meet the International Monetary Fund (IMF)’s primary budget surplus target without cutting expenditures, the government has heavily taxed all possible sources of expenditure. This has placed a significant burden on salaried individuals and imposed taxes on infant milk, cement, homes, air tickets, and both perishable and non-perishable food items. Wheat flour mills are on strike against the 2.5% income tax imposed on their supplies, and rice millers are considering similar action. Traders have also threatened street protests against the FBR’s move to collect income tax based on the rental values of their properties.
Regarding the digitisation of the FBR, Tiwana said that McKinsey & Company informed the prime minister that full digitisation would take between two, two and a half years. The chairman added that the PM has asked the company to complete the job in one and a half years. PTI’s MNA from Sargodha, Usama Ahmad Mela, criticised the hiring of foreign consultants, calling it a lack of trust in the country’s capabilities.
Tiwana revealed that the FBR’s IT equipment has reached the end of its life but hopes it will be replaced by January next year with an $80 million World Bank loan. The FBR had promised to upgrade its IT system three years ago after its website was hacked by Indians.
The standing committee expressed dissatisfaction with the FBR’s performance, unanimously agreeing that taxes are collected automatically. They argued that after excluding the impact of inflation and currency devaluation, last year’s Rs9.31 trillion collections were not commendable. PTI’s leader of the opposition in the National Assembly, Omar Ayub, questioned whether the FBR had the courage to tax military generals, referencing former chief of the army staff General Qamar Javed Bajwa.
“There are no exceptions, and the FBR will go after all non-filers,” claimed Tiwana. The chairman said the tax machinery collected Rs4.53 trillion in income tax in the last fiscal year. Of this, Rs1.462 trillion was collected as advance income tax and Rs2.683 trillion as withholding taxes. The share of withholding taxes is gradually decreasing, remaining at 58.5% in the fiscal year 2023-24. Tiwana stated that Rs1.6 trillion in withholding taxes had been collected from salaried individuals, dividend incomes, interest income, and exporters, all based on actual income levels.
Out of the Rs2.683 trillion collected in withholding taxes last fiscal year, Rs1.641 trillion was adjusted by taxpayers in their returns, and Rs338 billion was paid by non-filers of income tax returns. On broadening the tax base, Tiwana said that 6.1 million returns were filed in the tax year 2022, while about 5.2 million had filed their returns by June 2024. He hoped the number would increase before September 30.
The FBR has identified 2.4 million non-filers for blocking their SIM cards based on their expenditure patterns. So far, 226,000 SIM cards have been blocked, leading to 86,000 of them subsequently filing their returns.
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