ISLAMABAD: With envisaged target to increase number of return filers by 20 percent for this ongoing financial year, FBR has kick-started countrywide campaign in Large Taxpayer Units (LTUs) and Regional Taxpayers Offices (RTOs) for educating the taxpayers to broaden its narrowed tax base.
“Yes, we will make efforts to increase number of return filers by at least 20 percent during the current fiscal year,” a senior FBR official said and added that the tax machinery made it mandatory for all return filers to attach wealth statement along with filed returns. In the wake of making wealth statement mandatory and other documents, FBR extended the date for filing returns up to October 31, 2013.
In last financial year, FBR had received income tax returns of around 7, 30,000 including individuals and corporate sectors. The corporate sector returns stand at 23,000 out of total received returns.
“We have kick-started an exercise of sending tax notices to 10,000 non-filers every month, asking them to come forward and discharge their national duty of filing returns and paying due taxes,” a senior official of FBR confided. So far FBR has sent notices to about 25,000 potential non-filers in first three months of the current fiscal year.
When contacted, FBR’s Member Inland Revenue (IR) Policy Shahid Hussain Asad said that FBR made it mandatory for filing wealth statement along with filed returns. In order to facilitate the return filers, he said, the FBR extended the deadline for filing income tax returns up to October 31, 2013 and now taxpayers would have sufficient time to collect relevant details for filing their returns within the stipulated timeframe.
It is relevant to mention here that in the country of over 180 million population, only 730,000 individuals filed their income tax returns.
Some 118,000 entities are enrolled in the sales tax system but only 15,000 actually pay any tax, with 82 percent of total sales and federal excise revenue coming from only 100 companies.
According to IMF’s report on Pakistan, these low numbers reflect inability of previous reform efforts made by FBR to deliver sustained results.
The authorities need to develop and implement a strategy to strengthen tax administration, with the technical assistance of the Fund and the World Bank. While key elements of the strategy will need to be defined, it should include significantly stepping-up FBR’s enforcement activities and improving its legal authority (such as to facilitate asset seizures for tax evaders and to presumptively bill taxpayers).
The IMF states that the anti-money laundering framework will need to be fully applied in this effort. Fiscal consolidation will have to rely heavily on tax policy changes to broadening the tax base.
The implementation of a full Value Added Tax (VAT) remains the first-best option to raise tax revenue.
The administrative authority to grant tax exemptions via SROs should be eliminated to prevent further degradation of the tax net. Income tax should integrate income from all sources, concessions and exceptions should be eliminated, withholding should be adjustable, with the minimum tax on turnover remaining as a control for deduction.
