Islamabad: Faced with country’s 55 per cent of undocumented businesses and just 0.5 per cent of population filing tax returns, the government plans to soon launch first countrywide tax survey in 15 years and increase tax rates on high-end utility consumers and non-tax filers in the coming budget.
A parliamentary panel was informed on Thursday by a team of Federal Board of Revenue (FBR) that earlier governments did little to broaden the tax base.
The five-member sub-committee of the National Assembly’s Standing Committee on Finance and Revenue is assigned to make recommendations for broadening of direct and indirect tax net and to review and simplify tax filing process.
Led by Qaiser Ahmad Shaikh, the committee comprised Danyal Aziz, Shaikh Fayyazuddin, Dr Nafisa Shah and Nasir Khan Khattak.
FBR Member Shahid Hassan Asad told the committee that the rate of withholding tax introduced last year would be increased on non-tax filers in the upcoming budget. Also, the electricity consumers with more than Rs20,000 monthly bill would also be subjected to additional general sales tax under the budget proposals for next year.
He said the powers of the FBR to issue statutory regulatory orders (SROs) would also be withdrawn under the finance bill 2015-16. The authority to issue SROs would be transferred to the Economic Coordination Committee (ECC) of the cabinet.
Mr Asad also said there would be no tax incentives for anybody in the new budget and businessmen having combined utility bills of Rs50,000 per month would be properly registered as taxpayer.
Rahmatullah Wazir, the FBR’s Director General on Broadening of Tax Base told a sub-committee that about 55 per cent of national economy was undocumented as majority of retailers and service providers were unregistered.
He conceded that the filing of tax return was such a tedious job that even 198 parliamentarians could not file their returns for the last fiscal year. He said only 857,000 income tax returns had been filed this year which constituted less than 0.5 per cent of the total population. Not only this, the number of total sales tax returns also stood at a disgusting 115,000.
To add salt to the injury, Mr Wazir said the banks were also hiding information regarding cash withdrawals from the tax authorities. For example in 2013-14 alone, the FBR found out through its own sources that Rs6.3 trillion were withdrawn from banks through cash but proportionate tax collection did not take place.
The major reasons he quoted for this dismal situation was the absence of an effective tax survey in more than 15 years. He said even the 2001 tax survey was not completed due to the events following 9/11.
He said a comprehensive tax survey should be permitted that would have far reaching positive impact on the country’s revenue collection.
The sub-committee led by Qaiser Ahmad Sheikh, MNA of PML-N said the FBR had the powers to conduct tax surveys regularly which should go ahead. Shaikh said the successive governments did not pay attention to removal of structural weaknesses in the tax system or allow tax surveys due to political compulsions.
Rahmatullah Wazir said the FBR had neither reliable data nor the analytical capacity to ascertain whatever data was available. He said about 180,686 people have been identified who should have been in the tax net but they were not.
They have been issued notices but only 18,888 of them have filed returns with cumulative collection of Rs386 million. Orders have also been issued against 27,408 of these potential tax payers.
