Karachi violence makes March tax target difficult to meet

Govt loses Rs18-20b in revenues during three days of violence.

ISLAMABAD: As violence in Karachi entered the third day, the federal government has suffered revenue loss of Rs18-20 billion, which is likely to cost it the tax collection target for March.

A senior official of the Federal Board of Revenue (FBR) told The Express Tribune that on the first day of violence they collected Rs1.2 billion in taxes from Karachi, which was Rs12 billion less than the collection made on the same day last year. On the second day, tax collection was a mere Rs2.5 billion.

The unrest, triggered by killings of political workers, has jammed commercial wheel in the industrial capital of the country.

Against the monthly tax target of Rs174.6 billion, officials managed to bag Rs132 billion up to March 28, the official said.

For the current fiscal year ending June 30, the government has set Rs1,952 billion tax target. So far, it has collected Rs1,240 billion, which is less than two-third of the annual target, and needs to collect Rs712 billion in the remaining around three months.

No campaign to net 700,000 tax evaders

In sheer embarrassment for economic managers, the FBR chairman told the finance minister here on Thursday that there was no campaign to net 700,000 tax evaders, sources told The Express Tribune.

The abandoning of the campaign has put the economic team in an awkward position since it has been presented as the government’s key strategy to broaden the tax base.

According to sources, FBR Chairman Mumtaz Haider Rizvi, in a meeting of the Tax Reforms Coordination Group, gave the remarks when Planning Commission Deputy Chairman Dr Nadeem ul Haque repeatedly asked about the outcome of the campaign.

In his defence, Rizvi asked the finance minister to call the National Database and Registration Authority (NADRA) chairman who actually gave the “slogan”, which was “blindly” followed by the top economic managers.

Last year, the government had planned to bring 700,000 “rich tax evaders” into the net in the hope of raising an additional Rs70-80 billion in revenues. A year on, only Rs700 million has been collected from 66,000 respondents, out of 457,400 who were sent notices.

According to officials of the Directorate General of Intelligence and Investigation of the FBR, NADRA claimed that it had evidence of 700,000 people who were residing in posh localities and owned multiple bank accounts, but did not pay taxes. However, when officials started monitoring these people, they found that the “figure was a hoax”.

Crackdown

Meanwhile, the intelligence and investigation wing has launched a crackdown on high tax evading sectors – cigarettes and beverages. It raided offices of a cigarette distributor in Lahore and unearthed duty evasion of Rs100 million, said an official of the FBR.

In another case, tax officials unearthed a massive tax evasion by a bottler of an international beverage brand. The bottler was calculating 100% advertisement charges in the cost of production while actually it was claiming 17% of advertisement charges from the multinational company.

Published in The Express Tribune, March 30^th, 2012.