ISLAMABAD: Only one-third of the potential taxpayers who were issued notices by the Federal Board of Revenue (FBR) voluntarily filed their tax returns during the last three years.

The revenue collected from these filers amounts to Rs1.769 billion, an FBR official told Dawn on Wednesday.

Around 345,430 notices were issued to potential taxpayers between July 2013 and June 2016, but only 121,031 people filed their tax returns.

Of those who did not file their returns, the FBR projected a revenue of Rs22.478bn from 72,673 cases. But the bureau could only recover Rs851 million during the period under review.

When the tax campaign was launched in July 2013 after the current PML-N government announced its first budget, Finance Minister Ishaq Dar made a commitment to bring 100,000 people on the tax roll every year.

However, the number of tax-filers could only reach around one million in the tax year 2015. Critics put the blame for dismal tax collection on collectors as “nowhere people pay taxes happily”.

The FBR has created a national data warehouse which primarily includes information collected through third-party sources. Data of 5.2 million financial transactions was developed on the basis of that information.

These third-party sources include motor vehicle registration authorities, educational institutions, property registrars, development authorities, housing societies, electricity distribution companies, automobile manufacturing corporations and withholding tax statements.

In addition, the National Database and Registration Authority in 2012 identified more than three million potential taxpayers who owned luxury houses, had multiple bank accounts and frequently visited foreign countries, but did not pay taxes.

The data was shared with the FBR and verified by the officials working for the project, but no action was taken.

To control tax evasion and non-declaration, various penal provisions have been placed under the Income Tax Ordinance of 2001. Tax officials can impose a penalty of 0.1pc of the tax payable for each day of a default if a person fails to furnish income tax return. The penalty can be imposed up to a maximum of 50pc.

In case of failure to furnish wealth statement or withholding statement, tax official can impose a penalty of Rs25,000 for each day of default subject to a minimum penalty of Rs10,000.

Section 192 of the ordinance also provides for the prosecution of those who conceal their income. Offenders can be imprisoned for up to two years and/or fined.

Through the Finance Act of 2014, different rates of withholding tax for income tax return filers and non-filers on certain transactions have been introduced. However, the high rate of tax for non-filers did not produce the desired results.

The government also introduced a 0.6pc withholding tax on banking transactions exceeding Rs50,000 a day made by non-filers. The rate was then cut to 0.3pc, but was again revised to 0.4pc later on.

Though this levy failed to woo traders to come under the

tax net and file returns, it did emerge as a leading source of revenue as more than Rs20bn was collected during the fiscal year 2015-16.

 

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