ISLAMABAD: The government, despite tall claims, failed to broaden tax base by bringing in wealthy non-taxpayers into the tax net as only 14 percent of the people have filed returns out of total notices issued during last financial year 2013-14.
The government had planned roping in 100,000 wealthy non-taxpayers into tax net every year over the next five years. The country’s tax to GDP ratio is very low, less than 8.5 percent. However, the government has failed to produce encouraging result from the drive to broaden tax base as only 17,314 people have filed their income tax returns out of total notices issued to 1,20,350 individuals during last fiscal year 2013-14. Meanwhile, more than 38,000 second notices (under section 122C) which are to be followed by provisional assessment, collection procedures, and penal and prosecution proceedings.
According to data, the Federal Board of Revenue (FBR) had generated only Rs306 million from the non-taxpayers (who had now filed their returns) in previous financial year. The FBR had created demand of orders was Rs11 billion from those who had received tax notices. Meanwhile, the assessment orders passed against persons who did not comply with the notices were 26,690 during the last fiscal year.
The new policy measures taken through Finance Act 2014 to broaden the tax base include a new regime wherein different rates of withholding of Income tax for income tax return filers and non-filers on certain transactions have been introduced. This includes sale and purchase of immovable property, purchase, registration and transfer of ownership of motor vehicles, cash withdrawal from banks, and payment of profit on debt and dividend income. The higher rates of tax for non-filers will not only provide an incentive to non-filers to file returns and declare their income from all sources, but also provide a database to FBR for identification of potential taxpayers to be pursued of broadening of tax base initiative”, said a brief statement issued by FBR on Friday.
Sources in FBR informed that government had failed to produce desired results because of the week’s compliance. They further added that more than half of the notices could not be delivered to the recipients, as notice delivery failed due to the incomplete or incorrect addresses and people’s migration and refusal to receive the notices. Sources further informed that FBR had received data from the National Database and Registration Authority (NADRA) of more than three million non-taxpayers, who are enjoying luxury lives by living in posh areas and having multiple banks accounts and frequently visit foreign countries, but do not pay their taxes.
Pakistan had also agreed with the International Monetary Fund (IMF) to incorporate 300 thousand new taxpayers into the income tax net are moving ahead. For this purpose, we continue to strengthen our database by collecting information from multiple sources including urban property transactions, motor vehicle procurement and international travel.
It is worth mentioning here that Federal Board of Revenue (FBR) has not only failed to broaden the tax base of the country during last fiscal year but it had also failed to meet the revenue collection target despite revising it several times. The FBR’s poor performance continued during entire previous year. The FBR had fixed its target at Rs2,475 billion in last fiscal year, which was revised downward to Rs2,345 billion and again to Rs2,275 billion. However, the tax department even failed to achieve its revised target by the end of June 2014 despite taking additional taxation measures. The FBR collected Rs 2,266 billion during previous fiscal year 2013-14 against the twice-revised tax collection target of Rs 2,275 billion, leaving shortfall at Rs9 billion.
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