LAHORE: The Federal Board of Revenue (FBR) is rapidly gathering
data about the tax evaders, but it lacks the real authority to turn this data
mine into gold, as forces that are supposed to facilitate the department,
impede its efforts.
The
low tax to GDP ratio of Pakistan is the most talked about topic among economic
academics. They wonder what is stopping the apex revenue authority from
bringing in millions of tax evaders whose wealth and income record is available
with FBR.
The
data enrichment started in 1999-2000 when the Musharraf regime conducted a
countrywide tax survey. The authorities simply collected the data of the
properties, stocks, power bills paid by households, luxury vehicles owned by
them, the lifestyle, and properties of traders operating from large markets in
all big cities.
Data
on the fee paid by parents in most expensive schools was also collected to find
out whether the guardians pay taxes or not. The data was collected from major
cities only.
It
was declared at the time that the record of over 1.1 million tax evaders was
available with the tax authorities, and they would be brought into the tax net.
Had the plan been implemented transparently, it would have doubled the tax base
of the country from 1.1 million to 2.2 million tax fillers.
However,
the culture of influence played its role and most of the evaders were not even
touched. Not only that, the government thereafter announced numerous tax
amnesty schemes. Nevertheless, the tax base instead of enlarging started
shrinking.
Today
we have less than one million tax filers. The least was to ensure that those
whose wealth and income record was available with FBR were forced to avail the
amnesty schemes or had been prosecuted.
When
the present government assumed power it vowed to ensure tax compliance and
increase the tax to GDP ratio from eight percent to over 15 percent. Though the
tax to GDP ratio has increased by over two percent in the last four years, it
is far from the target set by the present government.
This
regime also lacks the will to confront tax evaders. Most of the revenues have
increased because of enhanced tax rates and high rates of sales tax and excise
on all products, particularly petroleum products.
Around
200,000 new tax fillers have been added during this period out of 1.1 million
identified in 1999. Another million or two tax dodgers that are roaming
scot-free continue amassing wealth through smuggling, under-invoicing,
under-filing, stock trading and real estate.
Recently,
the federal government imposed withholding tax on all school fees above
Rs20,000 per month. Surprisingly, the number of students paying fee over this
threshold runs into several hundred thousand.
The
aim of this income tax levy was mainly to increase revenue than to confront the
tax evaders. Those parents or guardians that pay their due taxes could claim
adjustment on the withholding tax paid on school fee while tax evaders would
not be able to avail this facility.
This
is not enough, as the tax collected through school fee is peanut compared with
the tax evaded. The non-filer parents of these students should be confronted by
the authorities.
This
again is unlikely to happen because of the influence these non-filers or
under-filers have in the power corridors. Some of the parents are government
servants that in some cases pay more monthly fee of their school going children
than their monthly salaries.
There
are some tax officials who do investigate the tax evasions systematically and
gather irrefutable documentary proof. It was due to such officials that a large
school chain of Lahore was confronted and the sponsors agreed to pay a sum of
Rs250 million as evaded income tax.
This
needs to be replicated to make other high fee charging school chains in the
country to pay income tax.
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