The need to levy new taxes has arisen in the ninth month of the ongoing fiscal year. DESIGN: FAIZAN DAWOOD
After Prime Minister Mir Hazar Khan Khoso assured economic managers that he will take all necessary measures to boost declining revenues, tax authorities on Friday presented him with two options. The first choice meant pushing for a controversial tax amnesty scheme through the promulgation of a presidential ordinance; the second, levying new taxes to raise Rs120 billion.
“One of these two options will be picked next week,” an official from the Federal Board of Revenue (FBR) told The Express Tribune after briefing the premier.
FBR officials said that despite the outgoing National Assembly’s refusal to pass the Tax Amnesty Bill, the scheme is still the first option for tax authorities. Under the scheme, the FBR will give what it has called a ‘once in a lifetime opportunity’ to three million identified tax evaders: pay a nominal tax of Rs40-70,000 and come into the tax net. Defiance carries severe penalties, like the suspension of Computerised National Identity Cards for commercial transactions, and a ban on air travel. The FBR chairman has often described the data on these identified tax evaders as a “goldmine”.
If the caretaker government decides against the amnesty scheme, the FBR will propose the levy of an additional Rs110 billion to Rs120 billion in new taxes, which will burden existing taxpayers, the officials added. These proposals have already been discussed with the International Monetary Fund (IMF). The FBR has recently withdrawn the zero-rating facility from the textile sector, and intends to withdraw this facility from three more protected sectors under proposed revenue measures.
Earlier, the finance ministry had told the premier that he had to take tough decisions or be ready to resort to the IMF for help in stabilising the staggering economy.
The need to levy new taxes has arisen in the ninth month of the ongoing fiscal year due to a widening gap between the budgeted Rs2.381 trillion annual revenue generation target and actual collections. So far this year, the FBR has collected Rs1.29 trillion, which is merely 54% of the original annual revenue collection target.
“We put everything on the table. Now it is up to the government to decide which option it will go with,” the official said. He added that the premier was told that the FBR could at best collect only Rs2.058 trillion for the entire year if nothing was done to address the situation.
That estimate is a staggering Rs323 billion less than the original collection target approved by the Parliament in June 2012 for the ongoing fiscal year. It is Rs135 billion below even the revised target of Rs2.193 trillion, which the outgoing federal cabinet approved early this month. The estimated shortfall will widen the national budget deficit by 1.4% of Gross Domestic Product, increasing chances of yet another historical budget deficit.
“The revenue collected by FBR so far warrants immediate attention, and necessary measures need to be taken to meet targets,” observed PM Khoso, according to a handout issued by his secretariat. The prime minister has sought proposals and recommendations for augmenting revenue collection for the approval of the government within the next three to four days, it further stated.
FBR Chairman Ali Arshad Hakeem has informed the prime minister that the FBR is experiencing difficulties in achieving tax targets due to the narrow tax base, a fall in imports, and the general situation in the country.
The premier said the need for finances cannot be overemphasised, and has directed the FBR to make all efforts to achieve targeted collection.
The FBR’s performance has been marred by political appointments to key posts, tax breaks to influential lobbies extended by the former regime, and a slowdown in economic activities in the country due to the government’s inability to resolve the energy crisis and do away with rampant corruption.
Published in The Express Tribune, March 30th, 2013.
COMMENTS (11)
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@Fahad: It is the job of election commission. To scrutinize. The candidates. FBR job is get the tax money from tax payer.
@Farhad: With all due respect, I would say the following. FBR dept job is to collect taxes. It does not matter whether it is interim govt or govt after or before the election. FBR has the means and laws already on their books. They do not need anybody's permission.So they must do their job.They can always confiscate properties of few big fish and auction them for the tax due. That is the way it is done in USA.
@Jibran:
I'd like all the above. RGST, one time amnesty, AND prosecuting tax evaders.
The issue at the moment, is not that these can be done. The issue is the mandate of the caretaker government, who's job it is not to make policy, but to conduct elections. If it gets bogged down in these things, then the state will lose much energy and capacity that it otherwise could use to conduct elections.
It's better for it to take the path of least resistance, tax existing taxpayers under the present framework, and leave the amnesty decision to the next assembly. FBR should be focusing on scrutinizing candidates, not engaging in amnesty schemes.
Why is FBR being lazy an dnot issuing notices to these so called 30,00,000 potential tax payers. FBR since December has been making false promises that they will issue notices to 3,00,000 top defaulters; someone should ask and hold FBR responsible for not issuing these notices
Why amnesty for cars/vehicles: instead of Rs 30 Billion duty FBR is colecting Rs 3 billion; FBR is responsible for this loss of Rs 27 billion
Amnesty scheme should not be introduced. national assembly in wisdom did not pass the bill inspite of the fact that 5 days it was on Order of the Day yet the National Assemblt did not vote. Let the new government come and decide.
Like the failed "Whitener Bonds" scheme of former Finance Minister Dr Mahboob ul Haq(late) in General Zia,s regime, the proposed tax amnesty scheme will not generate the desired amount of revenue.Raising the much needed financial resource through direct taxes requires a strong political will for taking unpopular decisions that will offend the politically influential and privileged class.The history of Pakistan shows that such unpopular decisions have always been avoided.
Why FBR does not freeze their account and confiscate their properties and assets ? Auction them in the open market. Put their name on the ECL . Remove their privileges to fly. Go after the few big fish . Rest will come to FBR and pay the tax themselves. I have been reading these numbers by the FBR for more than a year. I think FBR is helping these people under the table. FBR chief should be fired. He is just a talk with no numbers but no action. In USA this kind of thing will never be tolerated.
@Farhad: I accidentally clicked "Recommend". Now, there is nothing wrong with what you are suggesting. But the question is not what but how. There is no documentation of the income, and the only way forward is either to introduce RGST (which will enforce the documentation of the entire supply chain), or allow people to voluntarily register under tax amnesty. If you have a better idea, please suggest?
Rookie Imran Khan earlier tried to play politics on this issue. We have to resolve this issue. Either give Tax Amnesty to bring people under Tax bracket, or impose RGST. If none of them, then indirect taxation and currency printing will keep on rising. There is no way out.
This is a special law and will give an extra punch to the FBR. The suspension of CNIC, prohibition from leaving the country and payment of a one time tax is a very big breather and of deadly humongous proportions to the tax evaders. The problem will surface on the corruption in the FBR. If the caretaker PM opts for the second measure, then the citizens will have to pay extra on daily household commodities and inflation concomitantly will increase. So, better the first option is exercised with full determination and transparency. Salams
What's wrong with applying the same measures without amnesty? If you have the list, give them a deadline for tax payment and if they don't comply then hand the above mentioned punishments. Yeah but there is big 'if' they the will to do so.
This will be like a NRO for tax evaders. Tax evaders should be prosecuted. They should be required at least 50% of their total tax bill. 40,000 to 70,000 rupees for lifetime freedom from tax evasion penalty is too small. Unfortunately, Nawaz Sharif and Asif Zardari are two of the biggest tax evaders in the history of Pakistan.