According to Customs Today report, there around 4.5 million national tax number holders in a country of 180 million people, but only 850,000 filed income tax returns until December 5 and that too after repeated extensions in deadlines and warnings by the Federal Board of Revenue. The FBR has now decided to launch an awareness campaign with the help of German government and the World Bank to educate the masses about importance of tax collection in the national development. The point of concern is that the number of taxpayers is decreasing instead of increasing as half of taxpayers have filed tax returns than the previous year. According to experts, the government already provides annual exemptions and concessions of Rs 361 billion or 1.6 percent of the gross domestic product to various sectors of the economy on account of estimated tax expenditure in direct taxes. The exemptions and concessions include Rs 63 billion lifetime tax holiday to independent power producers; Rs 70 billion under-recovery of capital gains on securities and property;Rs 64 billion accelerated depreciation allowance; Rs 24 billion tax deduction on provisioning by banks; Rs 12 billion exemption of business income of trusts and foundations; Rs 34 billionconcessionary rates; Rs 11 billiontax deduction on WWF and WPPF payments; and various tax expenditures of Rs 83 billion.
It should be noted that collection of indirect taxes is discouraged in development economies as indirect taxes burden only on low-income classes. In total tax revenues, the share of direct taxes is 35.5 percent and the current revenue collectionsstand at 3.4 percent of the GDP after a decline of 0.4 percent in 2013-14.The experts believe that additional revenue of Rs 200 billion can be collected by taking affective measures in the tax collection system.The total number of taxpayers in Pakistan is 791,123, but only 85,000 filed their returns as most of the taxpayers stayed away from filing the returns for one reason or the other.Reportedly, over 40 percent filed zero-sum returns whileonly one percent companies accounted for 79 percent of the corporate income tax and top one percent of individuals accounted for 29 percent of personal income tax. The lower petroleum prices will also affect the tax collection as the fuel and power companies have the highest share in corporate income tax, which accounts for 28 percent, followed by banks with 15 percent.
Taxes are an integral part of economy and the government runs its day to day functions on taxpayers’ money. Low is the tax collection, low will be allocations for development and welfare programmes. The government has to borrow expensive money from foreign governments and donor agencies in case of low tax collections. The main culprit of the low tax collection is corruption and that is the task ahead for the government to do away with it.