Letdown: Tax base broadening plan gets cold response

The ambitious scheme aiming to catch tax thieves makes a poor start.

ISLAMABAD:

The government’s flagship drive launched to broaden extremely narrow tax base seems falling far behind the goal, as only 174 people or just 0.5% of over 30,000 who have been served notices filed income tax returns along with a paltry sum of Rs7.3 million.

Such a low rate of compliance underlines the deep-rooted corruption in the Federal Board of Revenue where case officers are allegedly receiving kickbacks far in excess of what has been deposited in the national kitty, underscoring the need to review the strategy of broadening the base through serving notices.

From July through September this year the federal government served tax notices to 30,333 potential taxpayers, according to figures compiled by the FBR. Out of those only 1,046 persons got registered with the FBR but actually only 174 filed income tax returns, showing a compliance rate of 0.57% to be precise. a

These people paid an amount of Rs7.3 million in income tax. On average every person paid Rs41,898 in income tax as a result of the Broadening of Tax Base (BTB) drive. Under an IMF condition, Pakistan ought to send notices to 100,000 big tax evaders before end June 2014.

The depressing outcome is the result of the new government’s economic policies that are perceived as taking the country one step forward and two steps backwards, said Ashfaq Tola, a leading tax expert.

The successive governments have been trying to broaden the extremely narrow tax base but could not yield the desired results and ended up putting more burden on the existing thin base. The previous government wanted to offer one-time amnesty to the identified 3.8 million people in return for asking them to pay Rs40,000 to Rs70,000 in income tax.

The stick was the threat to block the computerised national identity cards of those who would not opt to come in the net. However, due to stiff opposition by the PML-N, the previous government could not get the amnesty bill passed from the Parliament.

The PML-N government is said to have wasted the goldmine of the data, letting these four million people get off the hook.

According to sources in the FBR and in the legal fraternity, cases have been observed where the FBR officials struck under the table deals with the recipients of the notices.

FBR chairman Tariq Bajwa, however, said that it takes about three months from serving the notice to recover the tax from the potential taxpayer. If the recipient of the notice does not respond within two months the FBR has the authority to make provisional tax assessment, he added.

Out of 30,333 notices, over 7,000 or about one-fourth of the total notices were served in Lahore. In response, only 36 persons came in the net and paid Rs824,030 in income tax, according to the FBR figures.

In Peshawar, the FBR served 3,364 notices, just nine people filed income tax returns and paid Rs22,500 tax. In Multan, 2,985 notices were handed over to the big fish and in return 24 filed income tax returns along with Rs1.6 million tax.

In Rawalpindi, the FBR served notices to 2,434 persons, just 30 people responded but paid Rs2.6 million worth of income tax.

In Karachi, the FBR served 2005 notices and 15 people filed returns along with slightly over Rs1 million income tax. In Islamabad, the FBR served over 1,800 notices, 19 people came in the net and paid Rs1.1 million income tax.

In Quetta, the FBR served over 1,000 notices, only two persons filed income tax returns but did not deposit any money in the kitty. Similarly, in Gujranwala, the FBR asked over 1,400 persons to file income tax returns, only one person came forward but did not pay any tax. Same was the case in Sukkur where the FBR served notices to 359 persons. No one filed the return.

In Sialkot, the FBR served 2,340 notices, only four filed the returns and paid a meagre amount of Rs12,835 tax. In Sargodha, 1,183 got notices, one complied and paid Rs19,726 in income tax.

In Faisalabad, the country’s third largest city, about 17,00 people received notices, only 23 filed returns along with slightly over Rs100,000 in income tax. In Bahawalpur, over 1000 persons received notices, four filed returns with Rs22,375 as income tax.

Published in The Express Tribune, October 22^nd, 2013.

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