To overcome the revenue shortfall, which has almost reached to well over Rs. 190 billion in the last seven months, the Prime Minister has urged for the adoption of modern methods of tax collection. He rightly directed the bureaucracy of Inland Revenue Service department of the Federal Bureau of Revenue (FBR) to refrain from harassing those taxpayers who are already in the tax net, intensify their efforts to bring the tax dodgers into the tax net, unmask the tax evaders before the people and take action against the facilitators of tax evasion.
In Pakistan tax-to-GDP ratio is dismally low at 12 percent according to the governments’ version. But the independent economists have estimated it 8 percent of the GDP which is close to reality. The main thrust of economic managers has been on either put more burden on existing tax payer or raise the rates of regressive indirect taxes like sale tax, excise duty, custom duty, regulatory duty, turnover tax and tariff hikes of utilities. Agriculture income is still exempted from direct tax which provides conduit to big landlords for tax evasion on their income from industries and commercial enterprises. It was the office of Tax Ombudsman which exposed the collusion of tax officials with landlords by putting the income from livestock and poultry farming under the category of agriculture income to evade billions of rupees in taxes. One wonders why the present is hesitant to make the Benami Act 2017 practically enforced to authorize the FBR to confiscate the Benami properties so that the real owner should come out for paying taxes. The FBR has unearthed about 380 top tax evaders in its latest drive who have bought valuable properties in someone else’s names.
The finance Minister Asad Umer had suggested a solution for netting the tax evaders and non-filers and that is to use family tree data maintained by National Data Base Registration Authority (NADRA). There was a perception right or wrong that NADRA was reluctant to share this data with FBR. It is pertinent to mention that without using such data, the number of active tax payers was 2.4 million in President Musharraf era which Dr Salman Shah attributed to the success of self assessment scheme for evaluating tax liability of potential tax payers. The scheme was introduced because the coercive tactics of tax collectors culminated in failure of the door-to-door hectic drive for the documentation of the economy.
The tax collectors of Inland Revenue service department are still not serious about the authentic tax profiling of tax dodgers. A few months ago notices were sent to non-filers either at incomplete or invalid address which returned undelivered. Instead of correcting and authenticating the mailing address, second time notices were sent at the earlier wrong addresses which were brought back by the couriers services undelivered. Once again this futile exercise was made by sending notices along with account of payable tax. Directorate General of broadening tax base had sent 373 tax notices, out of which 145 returned undelivered. Unless and until the tax collectors and field officers who are hand in glove with tax evaders are fixed, tax -to-GDP ratio will remain stagnant. There are also complaints of lack of coordination between the different wings of the FBR, particularly the Information Technology wing with the tax collection wing. These serious issues need to be addressed on urgent basis as four months of the current fiscal year are left for achieving the revenue targets.
