Need to broaden tax base

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Pak­istan is amongst economies hav­ing the low­est tax to GDP ra­tio with only 1.8 mil­lion an­nual in­come tax re­turns. At the same time, tax­pay­ers within the ex­ist­ing base also in­dulge in tax eva­sion to con­ceal their li­a­bil­i­ties.

In this back­drop, the Fed­eral Board of Rev­enue (FBR) seeks to iden­tify new tax pay­ers and to hand­somely re­ward those who iden­tify tax eva­sion.

It is also rec­om­mended that ex­ist­ing re­wards for shar­ing key in­for­ma­tion must be pub­li­cized and the FBR should run a cam­paign ask­ing peo­ple to re­port to the rev­enue body about leak­ages. It is rec­om­mended that who­ever pro­vides au­then­tic in­for­ma­tion lead­ing to a con­firmed re­cov­ery should get fif­teen per­cent of the re­cov­ered amount.

Un­der the rules, fifty per­cent of the re­ward is to be paid to the in­former at the time of seizure of spec­i­fied goods and the bal­ance is to be given on the fi­nal­iza­tion of ap­peal pro­ceed­ings of the case. Any per­son on can reg­is­ter him­self as an in­former with the FBR. Some vested in­ter­ests had reg­is­tered them­selves as in­form­ers but had proved more of a hin­drance. In some cases it was ob­served that the in­former de­tected eva­sion and in­stead of in­form­ing the board, ‘set­tled’ the is­sue with the tax­payer.

While for­mer Fi­nance Min­is­ter Dr. Ab­dul Hafeez Shaikh had said that data of about 700,000 po­ten­tial tax­pay­ers was ob­tained through third party, there was still no real in­for­ma­tion about such tax­pay­ers.

This was be­cause of the re­fusal of National Data­base Regis­tra­tion Au­thor­ity (NADRA) to share cit­i­zens’ de­tails free of charge. Sim­i­larly, com­mer­cial banks had also re­fused to pro­vide de­tails of their de­pos­i­tors.

It is per­cieved that due to the large size of the in­for­mal econ­omy and mas­sive tax eva­sion in the sys­tem, in­form­ers can earn hand­some re­wards. Ac­cord­ing to FBR sources, the nar­row tax base in Pak­istan was the main ir­ri­tant in boost­ing rev­enue col­lec­tion .

It was es­ti­mated, ac­cord­ing to a re­port re­leased by the Pak­istan In­sti­tute of De­vel­op­ment Economics (PIDE) that in 2007, the coun­try’s un­der­ground econ­omy ranged be­tween Rs.2.91 tril­lion and Rs 3.34 tril­lion - 54.6 per­cent to 62.8 per­cent of the GDP.

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