Action against non-filers
Addressing a press conference, Chairman federal Bureau of Revenue (FBR) Shabbar Zaidi disclosed that a letter has been sent to Security Exchange Commission of Pakistan (SECP) to cancel the registration of companies that did not file tax returns. He lamented that 100000 companies are registered with the SECP but less than fifty percent file income tax return. He hinted that next budget will include measures to ensure compliance of tax laws to broaden the tax net. He urged the big business to avail the opportunity of Tax Amnesty scheme by paying two percent tax.
Prior to the tenures of previous two governments of PPP and PML-N the number of active taxpayers grew to 2.4 million during the period from 2000 to 2002 which remained intact till 2007. As the leaderships of the two main stream political parties themselves indulged in tax evasion therefore non-compliance of tax laws pertaining to the filing of tax returns significantly eroded the tax culture. In February last year, FBR presented a comparative data of two years tax laws compliance before the Senate Standing Committee on Finance that revealed sharp decline in the number of income tax return filers. In 2016 1.391 million taxpayers filed their income return. On the contrary in 2017, 1.238 million tax payers filed tax returns, showing that 152,749 tax payers slipped out of the tax net. The number of tax filers included significant number of taxpayer who belong to salaried class. The FBR has now asked the SECP to take action against the non-filer registered companies. But the small businesses under sole proprietorship and partnership firms need to be registered with the relevant field formations of Inland Revenue Services Department of FBR. A large number of such unregistered firms earn incomes and profits that fall within tax slabs.
Under the law it is legally binding on every citizen of the country to file income tax return by the end of September every year provide he has a taxable income. The World Bank in its “South Asia Focus Fall, 2017” had once again urged the previous government to utilise the available data of wealthy people of potential taxpayers to generate revenue for reducing the bulging budget deficit. A data of 3.8 million wealthy people has been available with the FBR since 2010. At the tail end of it tenure the previous PML-N government had floated a proposal of CNIC based authentic data of potential taxpayers but no policy decision was taken to implement it. Former Finance Minister in the incumbent government Asad Umer had also hinted at implementation of this proposal but it did not materialise so far. A perception, right or wrong, emerged that in the past NDRA had been reluctant to share this data, whereas in fact the Authority had made a valuable contribution in compiling the data of potential taxpayers. Like its predecessor civilian set up PTI government did not show enough spines to go after the tax dodgers and in the end announced Assets Declaration scheme. The present government had made a loud promise that it will double tax collection and substantially broaden the tax base which currently comprises 1.4 million taxpayers. It has not been successful in achieving these two goals. The tax collection pace is slow and the revenue shortfall is well over Rs. 420 billion.
A few months ago, FBR launched a futile exercise of sending notices to the non-filer wealthy people on invalid addresses, the bulk of which returned undelivered by Couriers Services. Instead of preparing a data of authentic address, second and third notice along with the accounts of estimated tax liability was sent on the incorrect address. Of the 373 notices which were sent in the first phase, 145 could not be delivered by courier services due to wrong addresses. The then Chairman FBR Jehan Zeb Khan has to bear the brunt of dismal performance of the Inland Revenue Services Department in the shape of transfer. As a first step towards improving the performance of tax collectors, the government took the decision to appoint a professional from the private sector as Chairman FBR. The sluggish and corrupt tax bureaucracy made a botched attempt to block the issuance of appointment notification of Shabbar Zaidi on the slot of Chairman FBR in the Establishment Division. Let us hope he will succeed in achieving the targets of revenue collection and broadening the tax base during his two year tenure.