Amid reports of revenue shortfall of Rs. 320 billion due to steep fall in tax collection, Federal Bureau of Revenue (FBR) has claimed that 1.8 million people have filed tax returns by March 31 and the date of filing income tax returns has been extended to April 30 to facilitate more tax filers. A statement released by FBR the other day stated that highest number of wealthy people to have filed tax returns, a claim in sharp conflict with over 2 million tax filers during 2000-07.
Over the past 10 years, the number of tax filers showed significant decline from 2.4 million active tax payers in 2007. In February 2018, FBR had presented data of tax return filers to the Senate Standing Committee on Finance which revealed falling trend in the submission of tax returns. The Standing Committee was informed that in 2016, 1.391 million taxpayers filed their tax returns. On the contrary, in 2017 1,238 million taxpayers filed tax returns, showing that 152,749 taxpayers slipped out from the FBR tax net. At that time FBR Chief of Income Tax policy had claimed that the number could jump to 1.6 million when Active Taxpayers’ Directory is published but that miracle did not happen and on the contrary 43 percent registered companies and partnership firms did not file tax returns but the relevant tax law was not brought into action against the non-filers.
The concessions announced in the second finance bill to the non-filers by the present government in the matters pertaining to expensive vehicles and immovable properties in the hope of giving spurt to business activities may not achieve the desired result. They have already switched over to cash payment in business activities to avoid withholding tax on bank transactions. Likewise, the small traders are now doing day to day transaction by way of cash transfer. The maximum limit of payment through banking channel from one account is Rs. 500,000 and the traders and consultancy firms either make payment through multiple bank accounts or prefer cash transactions.
Pakistan Tehrik-i-Insaf government has so far not succeeded in the pursuit of its avowed goals of broadening tax base and enhancing revenue collection. The FBR has missed even the downwardly revised tax collection targets. In January, the Finance Minister Asad Umer suggested that one solution for authentic tax profiling could be to use the family tree data maintained by the National Database Registration Authority (NADRA). But no substantive action has been taken to formulate a tax vision for reliable tax profiling. Hence FBR did a futile exercise of sending notices to the non-filers and tax dodgers on invalid addresses. Of the 373 notices which were sent in the first phase 145 could not be delivered by courier service due to wrong addresses. How come those inspectors of Inland Revenue Services Department of the FBR, who work in the field, could not collect authentic addresses of non-filers? Data relating to more than 2500 cases of purchase of expensive properties, vehicles and receipt of high rental income by non-filers has been handed over to the relevant tax collectors. It remains to be seen how the increase in the number of tax return filers improves the pace of tax collection to meet the target of revenue collection set for the current fiscal year as three months are left for its closing.