News Analysis |
In face of its failure to apprehend tax evaders and subsequently the inability to narrow down the tax base, the government is going for a new tactic to catch tax offenders. It has now started surveys of commercial and high-rise residential buildings across the country to comb people who have bought properties in plazas but are not tax filers.
This move will be the first of its kind in almost 17 years after the dismally unsuccessful door-to-door survey the military had tried to conduct during General Pervez Musharraf’s tenure.
Mr. Malik also informed the committee that the FBR’s field formations were too occupied with their revenue collection targets, therefore, they could not focus on the broadening of the base. He highlighted a basic flaw in the FBR’s policy.
Broadening of Tax Base DG Tanveer Akhtar Malik, an official of the Federal Board of Revenue (FBR) informed the Senate Standing Committee on Finance about the initial outcome of the plan. He said that the real estate sector is attracting major investment and the FBR has initiated mapping of plazas that have been constructed during the past 10 years. He also said that the Prime Minister, Mr. Shahid Khaqan Abbasi wanted a fruitful tax broadening campaign to be conducted that targets high-value unregistered taxpayers.
After completing the mapping exercise of high-rise residential buildings, the FBR will start a survey in residential housing societies, the director general apprised.
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This latest move comes as the tax authorities fail to retain even the existing taxpayer base. Against approximately 1.4 million active taxpayers as per tax year 2016, about 1.22 million people have so far filed income tax returns for tax year 2017, said Dr Mohammad Iqbal, Member Inland Revenue Policy of the FBR during the tax scramble.
He highlighted a basic flaw in the FBR’s policy. He said that if the tax base broadens, FBR’s revenue collection would dip due to high rates of withholding taxes being charged from non-filers of the income tax returns.
This statement goes to show that instead of expanding the tax base, the FBR has let about 180,000 people off the tax net. The last date for filing income tax returns was December 15th, 2017.
According to the law, it is compulsory for every person earning more than Rs. 400,000 per annum to file their returns. Mr. Saeed Ahmad, who is also a former deputy governor of the central bank, said that the process of filing income tax returns needs to be made convenient, as the current tax return form was very complex.
Less than 0.4% of the total population in Pakistan files income tax returns. Addressing a common reservation, Mr. Ahmed agreed that the tax base would not expand unless the FBR reassures people that they would not be harassed after coming in the tax net.
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The FBR’s Member Facilitation and Taxpayers Education said that more than 60% corporate employees do not file their income tax returns, although the tax is deducted from their salaries.
Only in Islamabad Heights, a private residential complex, about 97 people bought apartments and 40 of them were non-registered persons, said Malik. He said that the FBR would now send tax returns filing notices to these 40 people.
Malik said that pinpoint mapping of malls would give the desired results and so far the Commissioner Broadening of Tax Base has sent notices to 33,000 people. He said that in Islamabad mapping of 450 plazas has been completed so far. Under the exercise, the FBR is collecting information about the buyers from the owners of these plazas, said the director general.
Only in Islamabad Heights, a private residential complex, about 97 people bought apartments and 40 of them were non-registered persons, said Malik. He said that the FBR would now send tax returns filing notices to these 40 people.
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He said that according to data collected from zameen.com, the largest online property portal, there were over 550 plazas in Islamabad, each valued at more than Rs. 500 million. Similarly, there were around 70 malls in Islamabad that have a net worth in the range of Rs. 1 billion to Rs. 2 billion.
Mr. Malik also informed the committee that the FBR’s field formations were too occupied with their revenue collection targets, therefore, they could not focus on the broadening of the base. He highlighted a basic flaw in the FBR’s policy. He said that if the tax base broadens, FBR’s revenue collection would dip due to high rates of withholding taxes being charged from non-filers of the income tax returns.