Wild-goose chase: Number of tax-dodgers grossly overstated: FBR

Vague data on tax evaders has made meeting revenue targets impossible, say officials.

ISLAMABAD:

Last year, the government decided to bring 700,000 ‘tax evaders’ into its net in the hopes of raising an additional Rs70-80 billion in revenues. A year on, and only Rs700 million in taxes have been raised from 66,000 respondents out of the 457,400 supposed tax dodgers who were sent notices.

The ‘success’ of the campaign against tax evasion is bound to raise questions; especially since it has been presented as one of the key elements of Islamabad’s strategy to convince international lenders of its sincerity in pursuing fiscal reforms. This seems to be just one more area where the government had set itself an overly-ambitious target.

The Express Tribune tried to dig up the source of these numbers, and get some insight into the future of the campaign, through background interviews conducted with various taxation officials. We were told that they certainly had not been conjured up by the Federal Board of Revenue (FBR) – the authority responsible for tax collection in the country.

According to officials of the Directorate General of Intelligence and Investigation (I&I) of the FBR, the figure, in fact, had been worked out by the National Database and Registration Authority (NADRA). They said that NADRA had claimed evidence of 700,000 people who resided in posh locales within the country, owned multiple bank accounts, but did not pay taxes.

When the officials started monitoring the ‘suspects’, they found that the “figure was a hoax”. Some of the individuals were already paying taxes and the details regarding their bank accounts were vague. When the FBR tried to approach the banks for more information, they got served legal notices instead.

NADRA’s Deputy Chairman Tariq Malik has not yet responded to our repeated attempts at soliciting a comment regarding these revelations.

The investigating officials from the FBR also said that NADRA had shared vague details of 43,000 individuals during the previous year based on certain assumptions which, on further investigation, had turned out to be untrue.

“The data provided leads in only half the cases; and even then it was insufficient to provide ample grounds to trail those people”, said an official who wishes to remain anonymous. He said that the NADRA had again sent vague details of 19,429 individuals in the current financial year, and has not followed up on them at all.

“It [700,000 more taxpayers] was not the FBR’s slogan – the slogan was raised by the chairman of NADRA, and the finance minister hastily announced it in his budget speech”, said Shahid Hussain Asad, Member Inland Revenue FBR, who also holds the charge of director general I&I.

He says that increasing the tax base is tantamount to national duty and the FBR will keep pursuing the campaign. However, he cannot guarantee that the FBR will be able to recover Rs70 billion from these individuals.

While the government struggles to broaden its tax base, the number of returns filed till December 31 2011 slipped to 1.2 million, down 42 per cent from the 1.97 million filed in the same period last year.

The I&I department says that despite the snail-paced progress of the campaign, the authorities have kept up the accountability process. However, officials bemoan the lack of moral ground on which to base it on: when the judiciary, presidency, provincial governors, the National Logistics Cell and the Frontier Works Organisation are exempt from taxation, it is difficult to justify it to the common man, they say.

Under the campaign, the FBR has sent notices to 28,000 individuals, and demanded Rs7.7 billion in outstanding taxes from them.

Dr Akram ul Haq, an expert in tax affairs, has dismissed the campaign as a way of “minting money”, and said that the authorities have to first incentivise people in order to be able to broaden its tax base.

Published in The Express Tribune, February 23^rd, 2012.