It has now become an established precedent that the elected governments, particularly the one controlled by mercantile class, show leniency to tax return non-filers and tax evaders. This has been a glaring feature of all the governments of PML-N. The data of tax return filers presented by the Federal Bureau of Revenue (FBR) to Senate Standing Committee on Finance reveals that the number of tax return filers has dropped significantly over the past five years. In 2016 1.391 million tax payers filed their income returns. On the contrary, in 2017 1.238 million taxpayers filed tax returns, showing that 152,749 tax payers slipped from FBR already narrow tax base.
Under the law it is legally binding on every citizen of the country to file income tax return by September 30 every year provided he has a taxable annual income of Rs. 400000 or more. The inefficiency, corrupt practices in FBR and political pressure on tax officials are the major causes of eroding tax culture. However, hoping against hope the FBR Chief of income tax policy has claimed that that the number of return filers would jump from 1.238 million to 1.6 million when FBR would publishes the Active Taxpayers Directory next week. Amazingly, the number of tax return filers has shown a 96 percent rise in the salaried class, whereas it on the decline in the corporate sector. Almost 43 percent of registered companies and partnership firms do not file tax returns and the relevant law is not brought into action..The numbers of unregistered firms whose income and profits come under the tax slabs also do not file income tax return.
The World Bank in its report “South Asia Focus Fall 2017″urged the government of Pakistan to utilize the available data of potential tax payer with FBR to generate revenue and substantially reduce the budget deficit. A data of 3.8 million people is available with the FBR since 2010. The Prime Minister Shahid Khaqan Abbasi had announced that another tax amnesty will be given to broaden the tax base. But during the tenure of the present government the earlier three tax amnesty schemes did not yield the de sired results, therefore, the auditors of A Ferguson Firm were not optimistic about appreciable increase in the number of tax filers. The Prime Minister also hinted in an interview with Bloomberg news that national identity database will be used to build an authentic tax profile of potential taxpayers. He said that a plan will be drawn to plug the leakages in tax collection, encouraging exact property valuation, lowering individual tax rate and offering tax amnesty.
The history of CNIC based tax profiling is not a pleasant one. In a purely military government of General Zia a paltry amount of Rs. 1.5 billion was declared through Whitener Bonds., In the General Musharrif military led government the survey for the taxable immoveable assets was abandoned because of political expediency. The last tax amnesty plan of the present government plan resulted in just0.3 percent increase in the number of tax payers. The significant sources of direct tax revenue are agriculture income and brokers profit on which the governments have been unwilling to impose tax. The feudal industrialists show their income from corporate business as agriculture income and evade billions of tax. Taxing agriculture income will generate sufficient amount of revenue. Likewise, broker’s tax will also yield the desired amount of revenue. Legal and medical practitioners also indulge in tax evasion and their income needs to be properly assessed for income tax payments.. Broadening the tax base require political and moral will which is an extinct commodity in our political culture strengthened over the past few decades` by the political elite inside and outside the corridors of power.
