ISLAMABAD: Increase in tax collection is impossible without documentation of the economy and currently three out of four bank accounts are undeclared with the Federal Board of Revenue (FBR).
This was stated by former chairman FBR Shabbar Zaidi while speaking at the Aaj TV programme 'Paisa Bolta Hai' with Anjum Ibrahim.
"I was fully empowered as the FBR chairman, unlike my predecessors or successors. However no one can sort out the FBR without sorting out the economy first," said Shabbar Zaidi adding that there is talk of correcting the FBR but the foremost priority should be on documenting the economy.
Level of the documentation is evident from the fact that there are very few bank accounts on FBRs tax record and, on average, out of four bank accounts, only one account is declared Zaidi added.
"During my tenure as chairman FBR, I was compelled to give concessions to the traders," he said adding that "enforcement and concessions do not go hand in hand."
Former special assistant to PM on Revenue during PML-N tenure Haroon Akhtar Khan said he was disheartened at Shabbar Zaidi's resignation as 'people had high hopes that he would succeed in documenting the economy. The government should have appointed him as Adviser to the Prime Minister on FBR so that he reported directly to the PM on revenue matters," Akhtar stated.
Haroon Akhtar Khan said during PML-N tenure tax to-GDP ratio rose to 11.4 percent and total tax collection including provincial tax collection stood at 13.4 percent of GDP. "The PTI government should have built on our success instead of trashing previous policies," he said.
Haroon Akhtar stated that documentation is an ongoing process, which would take time.
Therefore, the FBR has to rely on revenue collection from import stage, withholding taxes and advance tax. The FBR has imposed taxes on almost everything including utilities, purchase of vehicles/properties, highest rate of corporate tax and sales tax.
Shabbar Zaidi has taken very effective measures of documentation as banks, provincial governments and NADRA are cooperating with the FBR. The anti-money laundering law, Benami law and international exchange of information laws are in place, Haroon Akhtar added.
A senior tax lawyer Waheed Shahzad Butt concurred that documentation is the only way to increase tax collection adding that there is a need to reduce tax rates to encourage documentation at every level and discourage cash economy.
Butt stated that out of the 2.8 million filers, one million are below taxable limit, and province-wise analysis shows that the largest number of filers, around 60 percent, are in Punjab but their contribution to tax collected is only 35 percent whereas in Sindh tax filers are 27 percent of total filers but their tax contribution is 45 percent.
Butt recommended that FBR must assign officials dealing with assessment and enforcement to investigate why one million filers (below taxable limit) have filed tax returns.
There are more than two dozen Large Tax Payers Units (LTU) and Corporate Regional Tax Offices as well as Regional Tax Offices (RTOs) but the bulk of revenue collection is coming from deduction at source.
Waheed Shahzad Butt urged FBR to institute checks and balances over field formations and revenue deducted at source should not be part of their assigned targets.
Copyright Business Recorder, 2020