Despite the difficult history of revenue collection over the last few years, the government set the ambitious target of Rs.2475 billion for the current year. The original tax collection target in the 2012-13 budget was Rs2,381 billion which was later revised downward to Rs2,191 billion. Half way through the year the target was further slashed to Rs2,050 billion and then to Rs2007 billion. The actual collection at the end of the day was Rs. 1950 billion.
The target is not only overarching but also onerous, and FBR is going all out to achieve it, marshalling all the resources in its arsenal. In his meeting with Finance Minister Ishaq Dar last week, Chairman FBR Tariq Bajwa said that there was no let-up in the Board’s efforts to reach the revenue target. Bajwa also informed the Finance Minister about the notices issued to new income tax payers as part of the campaign to increase the number of assessees.
Tax collection in Pakistan is no easy undertaking. The taxman going about his task comes up against one wall after another. Not to speak of the man on the street, even persons of considerable means and prosperous businessmen don’t think it is obligatory to file returns and pay tax. Less than 10 percent in a population of over 180 million are tax payers. Sixty seven percent of our legislators, all rich and powerful individuals, don’t pay taxes. On the other hand, agriculture, accounting for over 23 percent of GDP, is exempt from income tax.
Last year the government announced three tax amnesty schemes, but they failed to yield the desired results. FBR has now devised many innovative methods to collect more taxes like establishing a national database and getting details of bank accounts whose holders are outside the tax net. Thousands of notices have been sent out to potential tax payers but the response has been poor.
Despite all the daunting odds, FBR is gamely battling on. The takings in the first quarter are close to the target which is not bad given the fact that tax collection gathers pace as the fiscal year wears on. According to FBR, more than 500,000 potential tax payers have been identified who will be brought into the tax net by December 2013.
Section 114 of the Income Tax Ordinance (as amended up to June 2013) provides an exhaustive list of persons required to file income tax returns, including property and vehicle owners, members of chambers of commerce and industry or any professional body. But this legal provision is openly flouted.
According to an estimate, the number of those required to file income tax returns under the law is about 12 times the existing number of filers. One way to boost tax revenue is to bring agriculture within the tax net. Secondly, FBR should be empowered to initiate punitive action against powerful non-tax payers who are not contributing their bit to the national exchequer. These are the essential first steps to improve the abysmally low tax-t-GDP ratio.