The Federal Board of Revenue (FBR) can examine/investigate mining sector as one of the most potential areas for increasing revenue collection and broadening the tax base under the national drive to discover new avenues of generating additional revenue in far flung areas.
Sources told Business Recorder here on Sunday that the Regional Tax Office (RTO), Rawalpindi, covering jurisdiction of far-flung areas, has taken the initiative to scrutinise data of mining sector and restaurants, which are paying nothing in the form of taxes into the national exchequer. Following FBR's directives on enforcement plan, the RTO, Rawalpindi, headed by Chief Commissioner Shahid Anwar Khan, launched a massive exercise to check the potential sectors, particularly mining and restaurants on motorways, where revenue leakage is taking place. Resultantly, the regional authorities not only discovered unregistered persons, but also made efforts to recover income tax, sales tax and special excise duty from mining sector and restaurants.
At the same time, the regional authorities discovered non-payment of huge amount of tax from contracts under Section 236-A of the Income Tax Ordinance 2001.
Details of the cases show that the FBR recently appointed Abdul Hafeez as new Commissioner Enforcement at RTO Rawalpindi. The expert teams of enforcement department started checking the potential areas to improve documentation within their territorial jurisdiction. The regional authorities were surprised to note that the mining sector is a potential area having vast potential for documentation at national level. The tax department can collect millions of domestic taxes from this sector through proper application of law and enforcement strategy. The mining areas within the jurisdiction of the RTO Rawalpindi covers Attock, Kallar Kahar, Choa Saidan Shah, Dina, etc.
The tax officials, deputed for this task, found that very few mine owners are showing their actual total daily production of coal, salt and gypsum. Leases have been allotted by mines and mineral department Punjab and usually royalty contracts have been awarded to different contractors to collect royalty on coal, gypsum salt and other minerals.
The regional authorities started taking immediate steps for recovery of domestic taxes including income tax, sales tax and special excise duty from mining sector.
Sources said that every mine owner has to pay Rs 55 per metric ton of coal, gypsum, etc as royalty to the royalty contractor within the jurisdiction of the said RTO. They are showing very meagre production to the Mine & Mineral Department to evade the authorities. In cases of mine lease holders, every mine lease-holder is operating few mines himself but the remaining mines are being run by small contractors who extract minerals from his mine and pay the owner 30 percent to 40 percent share of their production. In this way, those engaged from production to supply including lease holders are paying meagre amount of tax. In most of the cases, they are not registered with the sales tax department.
Recently, RTO, Rawalpindi also launched a drive against the unregistered mine lease holders as well.
Similarly, the Mine & Mineral Department award royalty contract every year to contractors through open bidding. Advance tax has been levied to all the contractors @5 percent of the total contract amount under Section 236-A of the Income Tax Ordinance 2001 through Finance Act, 2009. But in most of the cases contractors failed to pay the advance tax in the past. The concerned department has been in the process of recovery of the due amount of taxes.
Sources said that if similar kind of enforcement exercises are launched in other areas like Sargodha, Karachi, Quetta, Peshawar, Hyderabad, etc, the revenue potential from this area is much more as compared to the under-estimated amount from this sector.
Other kinds of cases framed in far-flung areas showed that the RTO Rawalpindi has also made a remarkable performance in detection of huge amount from restaurants located on Islamabad-Lahore motorway. The authorities of RTO Rawalpindi have posted tax officers at the Tax Facilitation Centres of Pind Dadan Khan, Chakwal, Attock, Jhelum and Wah. Basic purpose of the opening of TFCs was to facilitate the tax payers at their doorstep. If the FBR empowers the TFCs to conduct audit functions, it would also improve enforcement and compliance.
These far-flung areas are about 150 to 200 km away from the main building of RTO Rawalpindi. However, the enforcement actions have been taken by the officers posted in these TFCs to improve compliance in these areas. The RTO Rawalpindi recently detected a case of a restaurant located at Kallar Kahar and Bhera where detection has been made of nearly Rs 70 million. This restaurant showed more than Rs 400 million sales as per its income tax returns but did not pay even a single penny into national kitty since 2005. The matter is now pending at the level of appeals. The RTO is also in the process of checking actual sales and turnover of these restaurants for accurate assessment of duties and taxes taking into account their daily performance. It has been observed that on motorway service areas price of eatable items are almost three times higher than the normal market prices.