In view of the growing number of cases of purchasing high value properties in someone else’s name, the government has decided to give tax authorities access to family tree database of citizens—in a bid to catch tax dodgers. Some of these people have been unearthed by the Federal Board of Revenue (FBR) during its latest drive against roughly 380 top tax evaders. The Finance Minister has decided that one solution could be to use the family tree data maintained by National Database Registration Authority (NADRA). There is a perception, right or wrong, that NADRA was reluctant in the past to share this data.
At the tail end of PML-N government former Prime Minister Shahid Khaqan Abbassi said in his interview with Bloomberg that a decision would be taken for CNIC based authentic tax profiling. But on the contrary he decided for another tax amnesty scheme on the advice of the then president of Pakistan Banking Council. The failure of the last PML-N government and also of the incumbent government to make the Benami Act, 2017 operational has curtailed FBR’s powers to only impose penalties on who holds Benami assets. The act had been passed to take punitive action against those who keep assets in the name of others to hide source of income and evade tax. Not only wealthy people but high officials of Inland Revenue Services department also indulge in such transactions.
Pakistan TehriK-i- Insaf government is failing in its two goals—broadening a narrow tax base and enhancing revenue collection. The government had promised that it would double tax collection and broaden narrow tax base which currently comprise only 1.4 million taxpayers including the new taxpayers in the wake of tax amnesty scheme of the previous government. It is pertinent to mention that the number of active taxpayers was 2.4 million in Musharraf era although his government’s hectic drive of documentation of economy failed halfway due to the rigidity of tax collection machinery but the self assessment scheme was a total success according Dr. Salman Shah. Over the past ten years the number of tax return filers started to decline and dropped to 1.2 million before the announcement tax amnesty scheme. In other words 50 percent active tax payers skipped out of the tax net.
A few months ago, as a part of its intended futile exercise the FBR had started sending notices to non-filers of income tax returns at incomplete and invalid addresses. When the first notice bounces back, a second one follows at the same invalid address and with the third notice account of tax liability is attached with the notice which will certainly return undelivered. How come that Inspectors of Inland tax Department could collect the valid addresses of wealthy non-filers? These notices had been issued by the Directorate General of broadening the tax base on the basis of faulty data provided by the FBR Operation Wing. Of the 373 notices sent in the first phase, about 145 could not be delivered by the courier services due to wrong addresses. The FBR is servicing notices to tax dodgers under section 114(4) and 116 of Income Tax Ordinance. These people have purchased properties over Rs. 20 million, cars of above 1800 cc or more engine capacity or have received rent to the tune of Rs. 10 million or higher in a year.
The data of tax dodgers is not a new one. It has been with the FBR since 2010 and the World Bank and the International Monetary Fund have persistently told the two previous governments to utilise it for broadening the tax base and revenue enhancement but they did not budge on the matter. Now the incumbent government is anxious to widen the tax net but different FBR wings are not effectively coordinating with each other and there are complaints about lack of automatic data sharing by the Information Technology Wing of the authority. 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 relevant FBR field offices.
The FBR was able to collect Rs.1.1 trillion in first four months of the current fiscal year and fell short of target by Rs. 100 billion. The growth in revenue collection was less than 7 percent while October’s growth was a meager 1 percent. It remains to be seen how FBR succeeds to get access to get access to Benami assets for imposing and collecting tax.
