Like the preceding years this year as well, Federal Board of Revenue is missing the target of mobilising tax revenue. The receipts of tax collection were estimated to be Rs.2.367 trillion during the first two quarters of current fiscal year but tax receipts stand at Rs.2080 billion, showing a shortfall of Rs.287 billion, although a growth of 16.9 percent has been achieved. This trend of tax collection continues may continue. It will make difficult to meet revised target of Rs.5.270 trillion revenue mobalisation during the remaining two quarters of the current fiscal year. Accepting the plea of Pakistan, the International Monetary Fund had lowered the tax collection estimate from Rs.5.503 trillion.
It the revised target of revenue generation is not met then it will impact Pakistan committed position of broadening the tax base by way of documentation of economy. FBR has failed to convince traders to register themselves either under the sales tax regime or income tax regime. They are now willing to accept fixed tax regime to which the IMF may not agree. The installation of point of sale systems at 17500 at big retail stores in shopping malls in Islamabad, Lahore and Karachi for the online transfer of sales tax received from clients to the national exchequer will bring some improvement in revenue mobalisation. However, there are also complaints that big retailers do not transfer the amount of sale tax through point of sale systems. FBR has fined restaurants in Kohsar Market of Islamabad for not transferring the sale tax proceeds.
Despite the hectic efforts of Chairman FBR, the objectives of authentic tax profiling and creating tax compliant culture could not be achieved. He had sent a letter to the heads of all commercial banks in July to provide data of Benami Accounts. But the initiative may have lost steam because these accounts may have been opened under foreign currency accounts to which Protection of Economic Reforms Act of 1992 not only provides strong secrecy cover but also exempt such accounts from the levy of income tax, wealth tax and even deduction of Zakat. Section 5 of the Act grants total immunity to foreign currency accounts holders against inquiry by the tax authorities. Clause 2 of the same section gives exemption from all types of taxes. Clause 3 of this section legally binds all banks to maintain complete secrecy about foreign currency accounts. Likewise, power distribution companies could not provide data about big electricity consumers who are non-filers.
The culture of tax evasion could not be discouraged notwithstanding tall claims of the present government. Foreign diplomats and representatives of non-governmental organisations have deprived the FBR custom duty of Rs.80 billion by misusing the facility of duty free import of highly expensive vehicles by handing them over to unauthorized persons and later selling to them. Similarly, the under invoicing in imports and exports from countries with whom Pakistan has signed free trade agreements accrue losses of billions to the national kitty. These trading partners don not comply with the clause of digital exchange of authentic trade data.
The performance of Inland Revenue Services Department does not show any signs of improvement and the government seems to have abandoned its programmes of reforms in tax collecting machinery. The Prime Minister had directed the FBR for netting non-filers. But proper homework was not done either by default or by design. Tax notices were sent to the holders of expensive properties, vehicles and people earning high rental incomes. But large number of tax notices could not be delivered due to wrong addresses. Serious efforts were not made to prepare a correct database of such wealthy non-filers. It is worth mentioning that a significant majority of non-filers have been identified the tribal districts of former FATA and PATA. Legislation for bringing these areas under tax jurisdiction is yet to be done. If there is will there is way. In the prevailing situation enactment of comprehensive tax laws and their implementation is inevitable.
