ISLAMABAD The Federal Board of Revenue (FBR) said it has sent notices to some 169,000 powerful people to bring them under the tax system after a Senate body adopted the tax adjustment law on Thursday. The FBR also warned that more of these individuals would be tracked down as the nation moves toward digitizing its tax system.
The Senate Standing Committee on Finance and Revenue approved the Tax Amendment Bill 2024 with the intention of strengthening laws and preventing tax evasion.
It gives the FBR the authority to prevent non-filers from opening bank accounts, buying cars over 800cc, buying real estate over a certain amount, or acquiring stock.
In order to become an act of parliament, the bill will now be sent back to the National Assembly for final approval. However, the FBR would not be able to use these new powers without the approval of the federal cabinet.
The substantial tax shortfall of Rs7.1 trillion anticipated for the fiscal year 2025 is something the FBR thinks the tax reforms will help it close.
Prohibition of wealthy non-filers
With Finance Minister Muhammad Aurangzeb, State Minister for Finance Ali Pervaiz Malik, and Information Minister Attaullah Tarar at his sides, FBR Chairman Rashid Mahmood Langrial stated that the government had used the data analysis to identify approximately 190,000 potential taxpayers who must be in the tax net.
Following additional data authentication by the field formations, field personnel verified around Rs7 billion in taxes from the top 5,000–6,000 individuals.
“There is an easy Rs50-60 billion taxation pocket if calculated today on the basis of 190,000 persons who should be direct taxpayers,” he explained.
Only 38,000 of the 190,000 individuals, he added, had filed returns and paid Rs370 million in taxes, while 169,000 wealthy non-filers have received notices.
Insisting that the status of these notices is now centrally monitored and time-bound, the FBR chief expressed hope that the number of returns filed by others would reach a satisfactory number in the upcoming months.
Even though 600,000 of the top 5% of earnings had already submitted returns and paid Rs620 billion, according to Mr. Langrial, 2.7 million of these wealthy people were still exempt from taxes, with an estimated potential revenue of Rs1.7 trillion.
He told the Senate that 672,000 of the richest 1 percent of taxpayers reported an average income of Rs13.2 million. He stated that the campaign will be expanded in the future to include more tax evaders in the tax system.
Monitoring of production
Mr. Langrial emphasized that one of the most important measures to stop tax evasion in sectors like sugar, cement, textiles, and beverages is production monitoring. He pointed out that while monitoring systems for other sectors are almost finished, systems for the sugar business are already in place.
He said, “To help develop our capacity for production monitoring, we have enlisted Chinese consultants.”
Mr. Langrial emphasized the necessity of digitization to increase transparency and decrease human interaction, while acknowledging the FBR’s operational capability deficiencies. Additionally, he acknowledged the retail industry’s sluggish adoption of point-of-sale (POS) technology.
Additionally, Finance Minister Aurangzeb voiced his displeasure with the POS’s deployment and requested that tax officials guarantee its efficacy. The complicated tax return filing form also irritated the minister. He added that the FBR’s main goal is to make the tax return form simpler for the salaried class, adding, “I am a salaried individual and cannot file my tax return.”
The minister received assurances from the FBR chairman that the streamlined return form will be used for the next tax year.
In order to put the country’s economy on the path of sustainable development and growth, the present government implemented structural reforms shortly after taking office, the finance minister emphasized. The tax reforms, meanwhile, continued to be at the top of the reform agenda.
He stated that the government aimed to raise the tax-to-GDP ratio to 13 percent, which was previously anticipated to be between 9 and 10 percent. He added that the rise in revenue collection would not only improve the country’s economic position but also enhance its reputation as a responsible state.
He claimed that the FBR was implementing digitalization to increase revenue collection, minimize human intervention to control harassment, and maintain transparency.
Risk management that is automated
Mr. Langrial brought up the issue of rising fraud during the Senate Standing Committee on Finance’s discussion of the usage of automated risk management systems to control input tax claims.
He suggested working with banks to create algorithms that would track financial transactions associated with people’s CNICs. Although banks currently have procedures in place, Mr. Aurangzeb pointed out that incorporating more data might enhance the detection of questionable activities.
The limits on non-filers’ ability to register vehicles and buy real estate were also examined, and Senator Anusha Rahman Khan suggested extending them to cover the buying and selling of gold.
The problem of fake drinks and cigarettes was a hot topic of conversation. Due to their exclusion from the sales tax scheme, many cigarettes were not being stamped, which made them vulnerable to counterfeiting, the FBR chairman noted.
He explained that cigarettes made lawfully were stamped to distinguish between those that were in compliance and those that weren’t. Additionally, he voiced worries regarding the track-and-trace system that was intended to keep an eye on product compliance, pointing out that its integrity had been compromised, making it useless.
