At least 770,000 people filed their income tax returns until December 5,down from 835,000 last year and that too after repeated extensions in deadline and offer of concessions. Various reasons are attributed to the low number of returns in which only Rs 5 billion have been collected. The prime suspectblamed for the low tax returns is said to be SRO-608 which is controversial in the eyes of traders, but a perfect law in the official circles and a right step tobring small traders into the tax net.
The Federal Board of Revenue (FBR) received Rs13.7 billion in taxes last year, hoping to take the number of taxpayers to 1.25 million this year, but the warning shots by Finance Minister Ishaq Dar to the traders that — either pay taxes or face the music — apparently remained unheard. The newspaper reports suggest FBR chairman Tariq Bajwa has allowed the income tax commissioners to take decisions on case-to-case basis and recover the losses. After all, a shortage of Rs 7.7 billion is not a small amount and the process to send notices to those who did not file wealth statement along with income tax returns has started.Many wealthy people have avoided filingof the wealth statements, which point finger at the lacunae in the tax collection system. According to experts, the basis of direct taxation is withholding taxes which are sometime treated as full and final liability, including the taxes paid by exporters, contractors and importers. At least Rs136.6 billion were collected from contractors through withholding taxes and Rs26.7 billion in withholding taxes from exporters. The importers paid Rs23.8 billion last year. At least Rs51.9 billion was collected as withholding taxes on telephone bills and Rs20 billion on electricity bills.The experts regard most of the withholding taxes as transactional taxes which do not fall in the definition of income tax.
On another note, the sales tax regime faces challenges like incomplete chain of registration, resistance from retailers, delayed refunds, weak audit and fake and flying invoices. The country’s economy is mostly undocumented, allowing rampant tax evasion. The solution lies in the affective monitoring of productionprocess and enforcement of a two-tier system for retailers.
For arguments sack, if the system is blamed for all ills, then no system is flawless and that is why emphasis always remains on implementationof the system rather than its revision over and over again. The government has already started a process to reform the tax system, but capacity-building of the tax collection officials is also essential to get the desired results. The businessmen always claim that they have no objection in the payment of due taxes, while the officials also express their resolve to carry out their official obligations diligently. There is a need to find gray areas to keep the system move in the right direction. Whether it is the government official or a businessman, the two sides are patriotic Pakistanis and the only need to do is to keep the national interest supreme in any situation.