Move backfires: FBR under scrutiny for tax collection
Revenue collection body lost taxpayers instead of recruiting more.
Revenue collection body lost taxpayers instead of recruiting more. CREATIVE COMMONS
ISLAMABAD:
Contrary to claims of bringing 3 million people in the tax net, the federal government has instead failed to even retain the already registered 2.7 million, highlighting the inefficiency of the tax machinery.
Out of 3.544 million people who have valid National Tax Numbers (NTN), only 890,000 or 25% of total registered persons filed income tax returns on incomes earned in the last financial year ended on June 30, according to fresh data compiled by the Federal Board of Revenue (FBR).
These persons were assigned the NTN by the FBR only after getting their complete biodata and can be easily tracked and asked to obey the law, provided the FBR has the will to chase them.
The 890,000 taxpayers, who chose to obey the law, paid an amount of Rs433 billion in income tax, with the corporate sector alone contributing almost three-fourths of the total income tax collected from these 890,000 taxpayers.
The Rs433 billion in income taxes was just 22.2% of the total tax collected in the last fiscal year. The FBR had claimed that it collected Rs747 billion income tax last year but the rest of the collection was on account of withholding taxes, generated through charges on phone calls, electricity consumption, contracts, imports and exports.
Out of the registered 53,744 companies, as many as 23,179 firms or 43% filed income tax returns and paid a sum of Rs315 billion in income taxes, according to FBR documents. The FBR has not taken any action against the rest of the companies that did not file returns.
Pakistan has one of the lowest tax-to-Gross Domestic Product ratios of 8.5% in the world, due to weak compliance of tax laws, massive evasions in connivance of corrupt FBR officials and tax exemptions, according to tax experts.
The governments in donor countries like the United Kingdom and United States have been facing pressure from their elected representatives to suspend aid to Pakistan, according to sources in the diplomatic circles.
The International Monetary Fund has also imposed a condition of bringing 100,000 new people into the tax net in the current financial year. Finance Minister Ishaq Dar too had championed the cause of broadening the tax base while delivering his first budget speech in the National Assembly.
“In order to expand the tax base, it is decided to utilise data collected by the FBR and NADRA in a systematic manner. In this regard profiling of 500,000 persons identified on the basis of financial transactions traced shall be carried out”, said Dar in his speech.
The majority numbers of registered persons having NTNs were in the category of private individuals and salaried persons. There are 3.34 million registered persons in both categories. The FBR did not provide a breakup between the registered salaried persons and individual businessmen. However, it did provide the figures who filed income tax returns.
Only 313,005 salaried persons filed income tax on income earned in the last fiscal year. They paid a sum of Rs50 billion in income taxes. The average income tax paid by the salaried class was Rs159,741 per person.
As many as 513,979 individual businessmen paid an income tax of Rs56 billion in the last fiscal year.
In the category of Association of Persons, out of registered 157,287 AOPs only 39,837 filed income tax returns and paid Rs28 billion.
According to sources in the FBR, incomes and assets declared in the income tax returns were understated. They added the FBR did not have the capacity to go after each individual and company. Even the external audit wing was too weak to carry out the audit and check the returns on risk parameters basis, they added.
Spokesman for the FBR Shahid Hussain Asad was not available for comments.
Published in The Express Tribune, March 27th, 2014.
Contrary to claims of bringing 3 million people in the tax net, the federal government has instead failed to even retain the already registered 2.7 million, highlighting the inefficiency of the tax machinery.
Out of 3.544 million people who have valid National Tax Numbers (NTN), only 890,000 or 25% of total registered persons filed income tax returns on incomes earned in the last financial year ended on June 30, according to fresh data compiled by the Federal Board of Revenue (FBR).
These persons were assigned the NTN by the FBR only after getting their complete biodata and can be easily tracked and asked to obey the law, provided the FBR has the will to chase them.
The 890,000 taxpayers, who chose to obey the law, paid an amount of Rs433 billion in income tax, with the corporate sector alone contributing almost three-fourths of the total income tax collected from these 890,000 taxpayers.
The Rs433 billion in income taxes was just 22.2% of the total tax collected in the last fiscal year. The FBR had claimed that it collected Rs747 billion income tax last year but the rest of the collection was on account of withholding taxes, generated through charges on phone calls, electricity consumption, contracts, imports and exports.
Out of the registered 53,744 companies, as many as 23,179 firms or 43% filed income tax returns and paid a sum of Rs315 billion in income taxes, according to FBR documents. The FBR has not taken any action against the rest of the companies that did not file returns.
Pakistan has one of the lowest tax-to-Gross Domestic Product ratios of 8.5% in the world, due to weak compliance of tax laws, massive evasions in connivance of corrupt FBR officials and tax exemptions, according to tax experts.
The governments in donor countries like the United Kingdom and United States have been facing pressure from their elected representatives to suspend aid to Pakistan, according to sources in the diplomatic circles.
The International Monetary Fund has also imposed a condition of bringing 100,000 new people into the tax net in the current financial year. Finance Minister Ishaq Dar too had championed the cause of broadening the tax base while delivering his first budget speech in the National Assembly.
“In order to expand the tax base, it is decided to utilise data collected by the FBR and NADRA in a systematic manner. In this regard profiling of 500,000 persons identified on the basis of financial transactions traced shall be carried out”, said Dar in his speech.
The majority numbers of registered persons having NTNs were in the category of private individuals and salaried persons. There are 3.34 million registered persons in both categories. The FBR did not provide a breakup between the registered salaried persons and individual businessmen. However, it did provide the figures who filed income tax returns.
Only 313,005 salaried persons filed income tax on income earned in the last fiscal year. They paid a sum of Rs50 billion in income taxes. The average income tax paid by the salaried class was Rs159,741 per person.
As many as 513,979 individual businessmen paid an income tax of Rs56 billion in the last fiscal year.
In the category of Association of Persons, out of registered 157,287 AOPs only 39,837 filed income tax returns and paid Rs28 billion.
According to sources in the FBR, incomes and assets declared in the income tax returns were understated. They added the FBR did not have the capacity to go after each individual and company. Even the external audit wing was too weak to carry out the audit and check the returns on risk parameters basis, they added.
Spokesman for the FBR Shahid Hussain Asad was not available for comments.
Published in The Express Tribune, March 27th, 2014.