Need to broaden tax base
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.