FBR initiative: Tax reform bills on the cards

Draft legislation to be tabled in NA; if passed, tax base will be significantly broadened.

Shahbaz Rana November 08, 2012

ISLAMABAD: In a much-needed move for the country’s economy, the government is likely to table three bills in the upcoming session of the National Assembly, aimed at putting into effect new schemes to broaden the country’s tax base.

The bills will be tabled after Finance Minister Dr Hafeez Shaikh has conceptually cleared the proposals. According to officials, the decision was taken at a meeting in Islamabad between Shaikh and a delegation of the Federal Board of Revenue (FBR) led by the FBR chief, Ali Arshad Hakeem.

The bills will deal with the Tax Registration Enforcement Initiative Scheme, which will ask tax-cheaters to pay a fixed sum upfront and become taxpayers and the Tax Investment Scheme to incentivise people to declare their assets, whether held in Pakistan or abroad.

The third bill will give effect to a proposal of paying 30 per cent of the recovered amount to informers who will give any information about those who are liable to pay tax, but prefer to remain outside the tax net, the official added.

The NA will be in session from November 12 and may take up the bills after the approval of the federal cabinet. The government aims at getting at least Rs96 billion in revenues besides bringing over three million habitual tax evaders into the net in the short to medium term.

The officials added that the bills will be formally sent to the law ministry after incorporating the input given by the finance minister. The minister had concerns over equity and the ability of the FBR to take coercive measures against those who don’t pay tax, they added.

Shaikh has asked the FBR to make sure that those who avail the schemes this time do not exit. He is said to have directed tax officials to use all possible avenues of enforcement against those who continue to cheat on taxes.

When contacted, FBR chairperson Hakeem said that the government was aiming to broaden the tax base and wanted to give one last opportunity to three million people identified as tax evaders before resorting to coercive measures.

According to a member of the FBR who attended the meeting, the option to immediately put three million people on the Exit Control List until they file tax returns was also discussed in the meeting. However, no final decision was taken in this regard, as the proposal involves other stakeholders including the interior ministry.

Several problems were highlighted during the meeting, reflecting on apparent corruption in both the FBR and amongst citizens of the country.

Contrary to the FBR’s claim that there were 1.45 million people who filed income tax returns in the last fiscal year, the finance minister was told that the actual number was only 1.02 million out of 3.58 million national tax number holders. The difference was explained by officials saying that the extra 430,000 people were either not traceable or had been doubly counted. Shaikh was also told at the meeting that the figure of income tax returns was flimsy and cannot be trusted.

In addition, the meeting was briefed on how it appeared that Rs17 billion had been gleaned from businessmen and salaried employees whose incomes did not even fall within the bracket liable to pay taxes. The officials explained that the reasons could be inaccurate data entries in the past or that the inaccurate figures were provided by the employers who deduct income tax on salaries.

The participants of the meeting were further told that every year roughly 200,000 people exit from the tax system due to corrupt FBR officials who facilitate them in return of bribes.

Published in The Express Tribune, November 8th, 2012.


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