Tax evasion is one of the biggest problems the Pakistani economy has witnessed since independence. It is unfortunate that only 2% of the people in Pakistan contribute to the national exchequer through taxes. Besides, people evading taxes escape away easily. This is because Pakistan does not have an efficient tax collection mechanism, although tax collection has ameliorated over the years, both at the federal and provincial level. Moreover, things need to be improved as far as collection of taxes is concerned.

When taxpayers do not pay taxes, the tax officials after giving ample opportunities to the taxpayers are bound to attach the accounts of the taxpayers in the respective banks. This is done after the concern officer (Assistant Commissioner of FBR/PRA/SRB/BRA/KRA) issues show cause to the taxpayer, conducts hearings and finally issues order in original (judgment) to the taxpayer in the concern case. The revenue officers are performing quasi-judicial functions in their capacity. Once the order in original is issued to the concerned taxpayer, the officers of the FBR and the provincial revenue authorities have no bounds and they can easily attach the accounts of the taxpayer. Moreover, the concern officers then issue recovery notices to the banks to attach the accounts of the taxpayer so that the recovery due in the form of tax evasion can be recovered from the taxpayer’s bank account.

This is sometimes done through a legal notice issued to the bank or at times they visit the banks in their personal capacity. The officers concern at banks face procrastination as far as the recovery is concerned. The federal government should bring in legislation or form some mechanism where the officers of the tax authorities can get the recovery promptly. This can be done if the tax officers write directly to the state bank and the state bank may direct the scheduled banks and send the required money in the government’s account. For this purpose, the SBP may form a separate department for the recovery purpose. The red tap ought to be removed because this causes delay in the recovery.

Moreover, instead of banks having their own compliance departments, one collective compliance department for all banks should be formed for this recovery purpose. Besides, the four revenue collection authorities which were formed after the 18th amendment for the purpose of collection sales tax on services should enhance their co-ordination for the sake of national interest. It often happens when there is a company providing services in all the provinces or few provinces, bifurcation of revenue or wrong declaration of revenue by a company becomes a problem. This is done by companies to evade taxes.

Better co-ordination among provincial revenue authorities can also help in bringing more revenue. The provincial and federal governments should devise some mechanism for the sake of national interest so that the tax collection can further improve. Such measures would surely improve the Tax to GDP ratio.


Karachi, October 7.