Assessing collections: Taxpayer directory paints incorrect picture
Huge discrepancy between tax payments and tax returns
SHARJAH:
Earlier in April 2014, a taxpayers’ directory was published by the Federal Board of Revenue (FBR) that contained the names, National Tax Number (NTN) and tax “paid” by each corporation, Association of Persons (AOP) and individual during fiscal year 2012-13.
Though a commendable act and a step towards better transparency, the 16,840-page report was incomplete and gave out an incorrect picture.
Later, the media found it as an opportunity to name and shame people, mainly politicians. However, not many questioned the incompleteness of information. I, for instance, was not listed in the directory. I was not ashamed but angry as to why my name was missing.
I have been a non-resident Pakistani for the last seven years. Before I left the country, all taxes were deducted at source by my employer and a tax return was filed. Upon leaving Pakistan, the tax return has not been submitted despite the fact that I have been paying my tax.
A person is treated a non-resident Pakistani, if he stays away from the country for more than 183 days a year, however, employees of the government posted abroad are considered resident individuals as per the Income Tax Ordinance.
As a non-resident Pakistani, I pay taxes on the assets that I have in the country, such as shares, bonds and property on which withholding tax on income (dividends, interest payments) is deducted at source as well as capital gains tax on the sale of shares held.
In my own little efforts, I raised the matter with a few FBR officials who, unfortunately, were unable to give a clear response about the submission of return or how to go about it. Even tax consultants advised me that there was no need to submit the return as it was of no advantage.
The taxpayers’ directory does not include my name, despite my paying six-figure sum as taxes in the form of CGT, dividends and payments received from organisations like The Express Tribune as an occasional writer.
As a consequence, I will have to pay a higher amount in withholding tax for 2014-15, since my name is not listed in the directory.
While the onus is on the taxpayer to submit the returns, the process in itself is cumbersome and without much benefit. Imagine the hundreds of thousands of Pakistanis who are unable to submit their returns because of a lack of clarity.
The impact of this is that the number of taxpayers, as per official definition, is much lower compared to actual figures. It becomes a conundrum when people discuss the tax returns of politicians and business owners, while not realising that the taxes actually paid exceed the returns submitted.
For the purpose of an all-inclusive system, the FBR should only use CNICs for collecting data of individuals. Whoever pays a tax or when tax is deducted at source, the CNIC number should be used to identify that taxpayer. The same criterion should be applied to taxes on dividends, interest, profit, coupon payments, capital gains tax and withholding taxes. As for businesses, an NTN should be used without doubt.
We are blessed with a very efficient system by NADRA, which is not utilised properly by the government. The FBR should use the CNIC data to collate the actual taxpayers’ data rather than using its old, vague system of tax returns.
It is sad that “experts” talk at length about the poor and low incidence of taxation in Pakistan and successive governments are chided for not doing enough. No one seeks an explanation from the FBR for its failure to report properly.
Might there be a possibility that what is submitted by the taxpayers is not siphoned off in the middle? One can hope that some sense prevails and the taxpayers’ directory is defined and refined to have an all-inclusive picture.
THE WRITER IS A UAE BASED INVESTMENT BANKER
Published in The Express Tribune, October 6th, 2014.
Earlier in April 2014, a taxpayers’ directory was published by the Federal Board of Revenue (FBR) that contained the names, National Tax Number (NTN) and tax “paid” by each corporation, Association of Persons (AOP) and individual during fiscal year 2012-13.
Though a commendable act and a step towards better transparency, the 16,840-page report was incomplete and gave out an incorrect picture.
Later, the media found it as an opportunity to name and shame people, mainly politicians. However, not many questioned the incompleteness of information. I, for instance, was not listed in the directory. I was not ashamed but angry as to why my name was missing.
I have been a non-resident Pakistani for the last seven years. Before I left the country, all taxes were deducted at source by my employer and a tax return was filed. Upon leaving Pakistan, the tax return has not been submitted despite the fact that I have been paying my tax.
A person is treated a non-resident Pakistani, if he stays away from the country for more than 183 days a year, however, employees of the government posted abroad are considered resident individuals as per the Income Tax Ordinance.
As a non-resident Pakistani, I pay taxes on the assets that I have in the country, such as shares, bonds and property on which withholding tax on income (dividends, interest payments) is deducted at source as well as capital gains tax on the sale of shares held.
In my own little efforts, I raised the matter with a few FBR officials who, unfortunately, were unable to give a clear response about the submission of return or how to go about it. Even tax consultants advised me that there was no need to submit the return as it was of no advantage.
The taxpayers’ directory does not include my name, despite my paying six-figure sum as taxes in the form of CGT, dividends and payments received from organisations like The Express Tribune as an occasional writer.
As a consequence, I will have to pay a higher amount in withholding tax for 2014-15, since my name is not listed in the directory.
While the onus is on the taxpayer to submit the returns, the process in itself is cumbersome and without much benefit. Imagine the hundreds of thousands of Pakistanis who are unable to submit their returns because of a lack of clarity.
The impact of this is that the number of taxpayers, as per official definition, is much lower compared to actual figures. It becomes a conundrum when people discuss the tax returns of politicians and business owners, while not realising that the taxes actually paid exceed the returns submitted.
For the purpose of an all-inclusive system, the FBR should only use CNICs for collecting data of individuals. Whoever pays a tax or when tax is deducted at source, the CNIC number should be used to identify that taxpayer. The same criterion should be applied to taxes on dividends, interest, profit, coupon payments, capital gains tax and withholding taxes. As for businesses, an NTN should be used without doubt.
We are blessed with a very efficient system by NADRA, which is not utilised properly by the government. The FBR should use the CNIC data to collate the actual taxpayers’ data rather than using its old, vague system of tax returns.
It is sad that “experts” talk at length about the poor and low incidence of taxation in Pakistan and successive governments are chided for not doing enough. No one seeks an explanation from the FBR for its failure to report properly.
Might there be a possibility that what is submitted by the taxpayers is not siphoned off in the middle? One can hope that some sense prevails and the taxpayers’ directory is defined and refined to have an all-inclusive picture.
THE WRITER IS A UAE BASED INVESTMENT BANKER
Published in The Express Tribune, October 6th, 2014.