According to Bajwa, the FBR will expand the tax base by targeting consumption patterns of tax evaders. PHOTO: FILE
ISLAMABAD:
In an attempt to tighten the noose around the affluent tax evaders, the Federal Board of Revenue (FBR) will target residents of the upscale neighbourhoods in metropolitan cities.
Talking to media about the move, FBR Chairman Tariq Bajwa said on Wednesday that residential landholders in the posh areas would be the first target of the bureau as it attempted to expand the narrow tax base.
He said those who owned or purchased properties in Defense Housing Authorities, Bahria Town and other expensive localities in Karachi, Lahore and Islamabad would have to explain their income sources and come in the tax net.
According to Bajwa, the FBR would expand the tax base by targeting consumption patterns of tax evaders. Currently, there are only 711,940 income tax filers in the country, which is less than half per cent of the total population.
Bajwa said that in the medium-term, the bureau was targeting an increase of 2.5 per cent of the population in income tax filers.
In the past, the FBR has made similar claims but failed to deliver despite claiming to have record of transactions made by about four million potential taxpayers.
What is different this time, according to Bajwa, is the complete freedom of work and the government’s commitment with the International Monetary Fund to increase the tax base.
Under this commitment with the IMF, the government has to send notices to 100,000 tax evaders before June 30, 2013. So far, the FBR has delivered notices to over 17,000 people, said Bajwa.
“We’re not sending notices for the sake of sending notice,” he added, explaining that tax evaders would be brought into the tax net.
Ownership of vehicles and international travelling are two more parameters which will be applied by the FBR to catch large tax evaders. Bajwa said the FBR has already sought travel details from the ministry of aviation.
He said benefits from broadening the tax base would gradually come after a time lag. “The Rs2.475 trillion collection target for this year is steep and very big but the FBR will try its best to achieve it,” said Bajwa.
While acknowledging that remittances and agriculture income were used as excuses to evade taxes, Bajwa said the government could not tax remittances.
In future, Bajwa said, the FBR would not announce tax amnesty schemes.
Talking about the Parliament’s authorisation for the FBR to access bank accounts of suspected tax evaders, the chairman allayed fears that people would rush to take their money out of the banking system, Bajwa said that since the authorisation, State Bank of Pakistan’s governor has reported that no unusual activity was witnessed in deposits.
Published in The Express Tribune, August 29th, 2013.
COMMENTS (36)
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@Javaad Ali: You are very right. It does not matter which sector of the economy , you are working, one has to pay the income tax. One of the major reason is representation by landlords in the assemblies and they do not want to pass a law where they have to pay the taxes on their own source of income. To put it mildly, this is high way roberry
@Ghazi Barotha: Please give reason and not the statement . Then one can understand you. Otherwise you are wasting time.
Ask FBR to publish the tax returns of their officers then ask the others to pay
@whitesky: To those who fall under low income; means welfare state concept (for more information check each country website for more details)
I want the Army Back .
definitely only small population is filing returns but this doesn't mean that tax payers are small in number...................income tax is withheld on large number of transactions.... secondly only industry is being tax and no sales tax is being imposed on service sector and agriculture....which is injustice............................
And please start with our Prime Minister,Tax the CM, and the entire National And Provincial Assembly and go down from there.
Otherwise, I'm gladly going to keep on evading taxes.
Because yes, it is that easy to evade taxes.
Go and ask from the people who are residing in the Askari area of Karachi, When I first heard the rent and house price there I was really shocked.
@whitesky: The approach you suggest is correct. In India, any purchase about Rs. 50,000 requires a Tax Identification Number regardless of whether it is paid by cash or credit. Those who do not file tax returns get notices inquiring their sources of income. . Additionally steps must be imposed to tax agricultural income since many feudals in Pakistan have large land holdings due to lack of land reform.
Can they do the logical thing and go after income and capital gains? The right way to do so is to reduce exemptions and reform the FBR where individuals enrich themselves at the cost of the country. We have had such round-about methods employed before. The result is harassment of individuals with little to show by way of increased revenues. If I were to be uncharitable, I would say that this strategy has been adopted to avoid any meaningful reform and to gain headlines.
@asim: "An average paksitani pays10,000RS approx per month as tax (electricity, gas, water, phone, mobile phones, internet, petrol tax, GST, road tax etc etc); In western welfare states its returned. "
Asim Saheb - can you explain how this amount of tax paid on utility services is returned in western welfare states ( to the payer)?
In all "fair" countries, every person who leagally earns above a certain amount annually, pays income tax, regardless of whether the source of income is Agriculture, manufacturing, or services etc. If there is no income tax on agriculture, the system is inherently UNFAIR. I am a tax payer and I resent this unfairness
An average paksitani pays10,000RS approx per month as tax (electricity, gas, water, phone, mobile phones, internet, petrol tax, GST, road tax etc etc); In western welfare states its returned. But not in pakistani islamic state where the rulers are richest elite with billions in assets in the sucking name of democracy
Iam a salaried person and my employer deducts a very high amount from my monthly salary
Records show as to when the house was purchased. Inherited properties should also be taxed. If houses and cars are bought by using CASH, then the individual must be investigated as to his income and his tax status. Stiff penalties must be charged for tax avoidance. PAKISTAN will come out with a win, win situation when the tax collection system is streamlined and all taxes due are collected. TAX benefits all, the poor and the rich.
Someone here said right, it should not be confined to DHA and Bahria, areas such as Johar town, Cavalary, Model town and many other areas have equal rates. They should go to everyone in every corner, but please target houses of 1 canal or above, or people with high credit card and travel history.
INHERITED houses DO NOT PROVE that a person has a lot of INCOME to be taxed.Nor does it qualify them for a bigger property tax.Tax can be on the value gained during sale of it. Otherwise it will give an impression that the LAND MAFIA - ready to buy the property sold due to this law is being supported for some returns. Standard of living can and can not be taken as an indicator. Let's start with MNAs and MPAs .
Generally in any country every purchase ( movable or immovable assets ) above a fixed amount say Rs. two hundred thousands will require the CNIC number recorded for the purchase and its reporting to the Tax authorities mandatory.. The Income tax (FBR) authorities must keep the list of Income tax filed along with the CNIC number therein. Each purchase of Rs. two hundred thousands and above will automatically search if the tax return of the person concerned has been filed or not. If not provincial the system will inform the local tax authorities with a template of notice asking the reasons for not filing the tax returns within a week's or 15 day's time. System will vouch if the reply has been received and satisfied upon including the payment of tax. The system will keep a watch and monitoring the tax returns filed / tax collected and follow up action for imposing penalty. Let this system be transparent and the common men should have the right to Information for it. .This will reduce drastically the tax evasion. IT software have already been developed and available for such system or it can be developed in Pakistan too. Not a big matter.
Nothing will ever done unless those who pass the law are forced to pay taxes and declare actual income & wealth. Also how long can the government continue to leave out agriculture sector?
They are insane- for FBR luxury car is Mehran, the upscale area for FBR is someone moving from 3 Marla house to a 5 Marla. I can bet they won't be able to do anything. We are rotten down to the core. God help us !!!
Let me tell you an example of expertise of these guys, These people recently asked every single company in an industry with an averge net assets of 15billion/company to pay avg tax of Rs.5billion/company just coz FBR thinks that all the companies in that industry have been understating sales for past 5 to 10 year by around 500%.(Absolutely rubbish claims)
They said these notices will be taken back if these comppanies pay advance taxes to meet IMF tax collection targets.Phew. None of them gave a damn to no one's surprise.
Nothing a chartered accountant can't fix.
Tax is taken on income. Having property does not mean there is any income. A house might be in a person's ownership because of inheritance. It does not prove a person has income. This would be a silly law to impose. Bank credits can be regarded as an income unless it can be proven otherwise (like refund, or already taxed at source etc)
Let's just start from the MNAs and MPAs. The rest will fall in line.
@Zeeshan: You beat me to it. I wanted to post the same thing !
Start with all govt servants living beyond their means and you will also ensure corruption is reduced...oops but that would mean FBR.personnel will also be scrutinized....
Please show some number and not the plan. IRS in USA does not work like that. You should learn from them . If some body does not pay the tax , confiscate his assets including his or her properties. Then sell those properties in public auction for the amount of the tax due. Show the action and just do not send the letter for paying tax.
First they make rules n then same dept staff will tell u how to evade tax n bypass these new rules..
One of the pathetic dept i have ever seen.. Just trying to open new doors to do more corruption..
I will believe this when I see it happen.
Is NS going to tax his vote bank?
Ha ha haaa haa...what a joke
This time around Start from North slowly move to Southern Pakistan. Sweep across Pakistan. Islamabad will be surprised taxing those in the National and Provincial Assemblies as well as the Senators, the Government functionaries including the FBR, the Pakistan Armed Forces, the Civil Servants, Public Enterprises, you have added more than 10% New Tax Payers. The Tax System is highly complicated in Pakistan and Pakistan rank among least educated. Tax Compliances also difficult in Pakistan, make it simple.
This time around Start from North slowly move to Southern Pakistan. Sweep across Pakistan. Islamabad will be surprised taxing those in the National and Provincial Assemblies as well as the Senators, the Government functionaries including the FBR, the Pakistan Armed Forces, the Civil Servants, Public Enterprises, you have added more than 10% New Tax Payers. The Tax System is highly complicated in Pakistan and Pakistan rank among least educated.
Hunt for people who bought properties in areas like Bahria and DHA? I sold my house in Johar town and bought one in DHA. There are literally no big differences in the prices of properties in different parts of Lahore. For instance areas like Model Town, Shadman, Johar Town, Garden Town, Tech society, Cavalry ground etc. are as expensive as DHA. So why cherry pick few areas? Personal grudges ?
“government’s commitment with the International Monetary Fund to increase the tax base.Under this commitment with the IMF, the government has to send notices to 100,000 tax evaders before June 30, 2013.” Thanks to IMF to force the govt to go against the tax evaders otherwise nothing would change. In addition to that the last five years of bank activities and proofs of foreign remittances be examined. Nobody from the foreign remittances can build huge estates while no other source of income. Some of these filthy rich send their families to “cooler” places in Europe and America to spend their summer vacations and shopping. It is about time these elitists who have never worked for a living and never paid taxes be brought to justice.
Good thinking. Start with affluent localities in Karachi, Lahore, Faisalabad and Islamabad first!