Every year since the Federal Board of Revenue (FBR) started releasing its tax directories, the numbers change but the story remains the same. This year is no different.
Granted that the number of companies registered with the Securities Exchange Commission of Pakistan (SECP) that filed returns in FY18 grew 20 percent, which is the fastest growth since FBR started releasing its tax directories. But the quality of growth is not really inspiring. Most of the increase in tax filers – 72 percent to be precise - is in the category of filers that filed a return of zero rupees.
This is also visible in the table for new filers where nearly 81 percent of first-time filers filed a return of zero rupees. For clarification sake, first time filers or new filers are assumed to be those companies whose National Tax Numbers were found in FY18’s tax directory but not found in FY17’s tax directory. Understandably, this may not be the most tenable assumption, but in the absence of detailed analyses presented by FBR, this should shed at least some light on the expansion of the so-called tax net.
It is interesting to note that while the number of new filers or first-time filers as described above was 9712 in FY18, the net increase in companies that filed tax returns in FY18 was actually 7482. This implies that about 2200 SECP-registered companies that filed returns in FY17 did not file their return in FY18. Whether this was because those companies had wound up their business such that there were ineligible to file a return in FY18, or whether they somehow escaped the tax net in FY18 is a line of query that requires closer scrutiny by tax officials.
The rest of the story is not much different from yester years and rather self-explanatory from the tables produced here. If 1.3 percent of the filers contributed 83 percent of total tax collection by companies in FY13, then 1 percent of the filers paid 81 percent of the tax paid in FY18. Similar observation can be made in the case of new or first-time filers.
The fact that with the all the noise on taxation only half of SECP registered companies filed tax returns in FY18 reflects poor coordination between the tax body and the SECP, especially considering that sans exceptions, when a company registers with the SECP it ought to file a tax return in the subsequent year.
One eagerly awaits FY19’s and FY20’s tax directories to assess what great leaps forward have been achieved under Naya Pakistan.
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