The Federal Board of Revenue (FBR) has to work harder to improve its image before it can think of achieving higher growth in revenue collection, which is the lowest in the region. Unfortunately, the FBR so far has been unable to infuse much-needed confidence amongst prospective taxpayers of the country. There could be many reasons for the dismal performance of the tax collecting agency but factual position is that harsh tax laws giving unbridled powers to tax collectors often result in harassment, intimidation and corruption.
Currently, there are five major compliances which have to be met by people in the tax-net. The notices and explanations seeking information and details issued under the Income Tax Ordinance 2001 from taxpayers often result in harassment and corruption. Among clauses often used by the FBR officials is Section 161/205 of the tax and by issuing notices to taxpayers who are withholding tax agents. The withholding tax agents are those taxpayers who have to deduct tax from their clients on behalf of FBR and deposit the same in the exchequer on due dates. Unfortunately, the FBR officials issue such notices seeking details of the tax amount deducted and deposited within due dates by withholding agents. This information could be easily verified on the FBR system. It is highly disturbing for tax agents to face such a situation where they have to often face harassment and intimidation. It is pertinent to say that these withholding agents get no reward or incentive for collecting tax on behalf of FBR.
Similarly, Section 122(5A) of Income Tax Ordinance 2001, which allows Additional Commissioner to revise tax return often results in harassment and corruption. The section allows the tax official to issue notices in case tax returns could be erroneous or prejudice to the interest of revenue. But once a notice is issued and tax official starts seeking details from taxpayers it leads to harassment and corruption. Such prima facie cases should only be handled by Chief Commissions of the respective Regional Tax Office (RTO).
The Section 214C of tax ordinance allows FBR to select tax cases for audit. These cases ultimately reach respective tax commissioners. Normally, it has been witnessed that most of such cases have been already audited by the commissioners of respective tax circulars. In short, all this leads to harassment and corruption.
Besides, commissioner income tax also has powers under Section 177 of the Income Tax Ordinance 2001 to select cases of tax for audit. This often results in multiple-audit of one tax case, whereas in the past only one audit could be carried out for a tax case after a three-year period which is also in vogue the world over.
Looking at the current dismal performance of the FBR it could be easily concluded that with unbridled powers vested with tax officials the prospective taxpayers would prefer to stay away from the tax net. No wonder as to why today 75 per cent people are out of the tax net.
Prime Minister Imran Khan has vowed to eradicate corruption from the country. He has also been working harder towards ease of doing business and reducing cost of business. But without eliminating corruption within FBR the needed growth in revenue collection by expanding tax net could not be achieved. It is mostly said that people out of tax net are more comfortable than those who are paying tax because they do not have to face the music of the system and corrupt officials of FBR who are the main hurdle in the way of widening of tax net and higher revenue collection. Besides, bringing changes in the harsh tax laws, the interaction between taxpayers and tax collectors be minimized. Although FBR is being automated, the organization’s system is also required to be automated because even today all internal correspondents are handled manually, the principal reason behind corruption.
Copyright Business Recorder, 2021