Documenting economy, broadening tax base: AGP expresses concern over FBR’s failure

ISLAMABAD: The Auditor General of Pakistan (AGP) has expressed serious concern over the Federal Board of Revenue’s failure to document the economy, registration of high economic activity and gradually broaden the tax base by the inclusion of all informal sectors under the tax net.

This has been stated by the Auditor General of Pakistan (AGP) in its new report on “Broadening the Tax Base” for 2021-22.

The report revealed that the FBR was unable to register 363,990 holders of commercial and industrial connections of electricity paying annual bills in excess of Rs50,000, liable to be compulsory registered under the Income Tax Ordinance, 2001.

According to the analysis of the AGP, 78,186 manufacturers having turnover of taxable supplies of more than Rs5 million or utilities bills more than Rs0.80 million per annum were liable to be compulsory registration under the Sales Tax Act, 1990 but the FBR failed to do so.

The scrutiny of third-party data revealed that 363,990 persons falling under the jurisdiction of the FBR were not registered with income tax, despite the fact that they fall under the prescribed limit for compulsory registration.

AGP unearths malfeasance worth Rs418.436bn by FBR field formations

On the basis of scrutiny of the FBR’s data, the AGP was of the view that the Inland Revenue field formations of the FBR are not making any significant effort to fulfil their statutory obligation to broaden the tax base for income and sales tax.

The FBR is not scrutinizing data from third parties such as utility bills and proof of payment of provincial taxes on agricultural land and income in order to register potential taxpayers or identify taxable income, the AGP stated.

The FBR is not following up with its own notices to persons liable to compulsory registration and payment of tax under the income and sales tax laws.

The FBR is not scrutinizing income tax returns to identify persons liable to be registered under the Sales Tax Act and vice versa. The FBR has also failed to register persons having high economic activity liable to be registered under the tax laws.

The FBR has also been unable to conduct digitisation of the tax system which was also slow and ineffective.

The FBR has also failed to initiate legal proceedings and pursue the BTB cases booked by the FBR on high economic activity liable to be registered under the tax laws, the AGP report added.

Copyright Business Recorder, 2022