The story of tax collected from associations of persons (AoPs) is little different from the story of tax collected from firms incorporated with the Securities and Exchange Commission of Pakistan.
Total tax collected from the AoP grew about 50 percent in the fiscal year ending June 2017. That’s solid growth compared to last three years’ when tax collections from AoPs had grown 12 percent, 36 percent and 22 percent in FY16, FY15 and FY14 respectively. However, this 50 percent increase comes largely on the back of phenomenal jump in tax collected from four AoPs: (a) Pak Gas Corporation; (b) CR20G-ZKB KLM Joint Venture; (c) ZKB Reliable JV; and (d) Limak JV ZKB.
Together these four AoPs had paid Rs1.1 billion in taxes in FY16. In FY17 their combined tax paid stood at Rs18.4 billion accounting for about 23 percent of total AoP tax collection in FY17 (the next 150 AoP contributed 22% of total AoP tax in FY17). Sans the growth in tax collected from these four AoPs, total collection from AoPs in FY17 was 19 percent rather than 50 percent. This begs the question who these firms are. ZKB – an abbreviation of Zahir Khan & brothers - is a company of engineers and consultants involved in infrastructure projects, having worked for the NHA, CDA, LDA and government of Punjab.
The real mystery is Pak Gas Corporation. In FY16 that AoP paid Rs3.3 million in taxes; in FY17 it paid a whopping Rs14.7 billion – which roughly makes it billion-dollar (in revenues) company. For comparison sake, Pakistan State Oil (PSO) paid Rs10.1 billion in taxes in FY17 according to the tax directory, whereas the country’s biggest bank – Habib Bank Ltd – paid Rs16.7 billion in taxes in FY17. Google search reveals precious little about this mysterious AoP called Pak Gas Corporation, nor do initial channel checks in oil and gas industry lead to any insights about the company.
In terms of number of tax filers within AoP category, FBR managed to expand the tax net to 55,760 filers in FY17, up 15 percent over the year before. However, the quality of that expansion remained poor with 55 percent of the increase in filers falling in the ‘zero return’ category. This is worse than the performance in FY15 when nearly a third of increase in filers fell in the bracket that paid between 1-10 million rupees.
However, in the absence of data pertaining to the total number of AoPs in the country, their sector-wise classification, active versus non-active status, their district wise location and so forth, any analysis of tax directory on AoP is an exercise of limited utility. It is hoped that the ruling party will not only widen the tax net but also improve the information basis for analyses based on which further the strategy for reforms and policy could be formulated.
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