FBR apprises SECP of tax dodgers

Sends a list of 10,000 companies that did not file tax returns.

ISLAMABAD:

The tax authorities have handed over a list of 10,000 companies to the Securities and Exchange Commission of Pakistan (SECP) that did not file income tax returns, with apprehensions that these firms are not dead and are still doing business.

A lack of coordination between the government departments and a weakening enforcement mechanism in the Federal Board of Revenue (FBR) has helped these companies evade taxes. There were over 64,000 registered companies in Pakistan, of which only 15,000 filed income tax returns by the last date of December 31, 2014.

The figure was also lower than the previous year when 24,000 companies filed tax returns. Over the years, the FBR has failed to maintain its tax base as the companies are gradually slipping from its net.



The FBR points out that many of these companies have been filing returns with the SECP and this indicates that they are still doing business and are not dormant.

An SECP official said the commission would first examine the record of 100 firms. It would also write to the State Bank of Pakistan (SBP) to unearth bank accounts of those companies that did not file income tax returns.

“The Easy Exit Scheme offered by the SECP to dormant companies in the past has been used to dodge the tax net,” said Zafar Hijazi, who has been recently appointed chairman of the SECP.

He said many companies were deleted from the database but they were still doing business in the country. The SECP would review the exit scheme, he added. The FBR has not actively been using its database to find the tax dodgers. So far, its focus has been on issuing tax notices to the people, asking them to file income tax returns, as agreed with the International Monetary Fund. Despite a drive to broaden the tax base, the number of regular tax filers is shrinking.

“The FBR is in the process of sending notices to those individuals and companies that filed income tax returns electronically in the preceding year but did not submit the returns for 2014,” said Shahid Hussain Asad, Senior Member of Policy Inland Revenue and official spokesman for the FBR.

He said the FBR had sent 77,000 notices to people who did not file returns online. Of these, 11,000 have submitted the papers.

The spokesman said 29,000 returns were in the pipeline and after that the FBR would start issuing notices to those companies that did not file the returns for last year.

The FBR does not have powers to slap stringent penalties for failure to file tax returns. Section 182 of the Income Tax Ordinance 2001 allows the FBR to impose a penalty of 0.1% of payable tax for each day of delay. It can impose a maximum penalty of 50% of payable tax on late filing of returns.

Furthermore, if a person does not file a wealth statement, he can escape the wrath of the law by paying a fine of just Rs100 per day, with a maximum of Rs36,500 for an entire year.

Many leading politicians had not filed income tax returns. However, they were declared eligible to contest the May 2013 general elections after paying penalties for filing the returns late.

Published in The Express Tribune, January 9^th,  2015.

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