ISLAMABAD - The PML-N government has failed to produce desired results from its drive of broadening tax base of the country by bringing wealthy non-taxpayers into the tax net, as only 14 percent of the people have filed their returns out of total notice issued during previous financial year 2013-14.
The incumbent government had devised a plan to bring 100,000 wealthy non-taxpayers into tax net every year in next five years in a bid to broaden the tax base of the country. The country’s tax to GDP ratio is very low, less than 8.5 percent. However, the government had failed to produce encouraging result from the broadening of tax base, as only 17,314 people have filed their income tax returns out of total notices issued, 1,20,350, during last fiscal year 2013-14. Meanwhile, more than 38,000 second notices (under section 122C) which are to be followed by provisional assessment, collection procedures, and penal and prosecution proceedings. 
According to the data, the Federal Board of Revenue (FBR) had generated only Rs 306 million from the non-taxpayers (who had now filed their returns) in previous financial year. The FBR had created demand of orders was Rs 11 billion from those who had received tax notices. Meanwhile, the Assessment orders passed against persons who did not comply with the notices were 26,690 during the last fiscal year.
“The new policy measures taken through Finance Act 2014 to broaden the tax base include a new regime wherein different rates of withholding of Income tax for income tax return filers and non-filers on certain transactions have been introduced. This includes sale and purchase of immovable property, purchase, registration and transfer of ownership of motor vehicles, cash withdrawal from banks, and payment of profit on debt and dividend income. The higher rates of tax for non-filers will not only provide an incentive to non-filers to file returns and declare their income from all sources, but also provide a database to FBR for identification of potential taxpayers to be pursued of broadening of tax base initiative”, said a brief statement issued by FBR on Friday.
Sources in FBR informed that government had failed to produce desired results because of the week’s compliance. They further added that more than half of the notices could not be delivered to the recipients, as notice delivery failed due to the incomplete or incorrect addresses and people’s migration and refusal to receive the notices. Sources further informed that FBR had received data from the National Database and Registration Authority (NADRA) of more than three million non-taxpayers, who are enjoying luxury lives by living in posh areas and having multiple banks accounts and frequently visit foreign countries, but do not pay their taxes.
Pakistan had also agreed with the International Monetary Fund (IMF) to incorporate 300 thousand new taxpayers into the income tax net are moving ahead. For this purpose, we continue to strengthen our database by collecting information from multiple sources including urban property transactions, motor vehicle procurement and international travel.
FBR spokesperson Shahid Husain Asad told The Nation that Federal Board of Revenue had issued notices to more than 120,000 people during previous financial year. However, he did not share further details regarding how many of them were delivered and how many recipients had paid taxes.
Issuing tax numbers will not help the FBR in broadening the tax base because there are more than three million people who have already been issued NTNs (national tax numbers) but only 840,000 of them have filed their returns this year.
It is worth mentioning here that Federal Board of Revenue (FBR) has not only failed to broaden the tax base of the country during last fiscal year but it had also failed to meet the revenue collection target despite revising it several times. The FBR’s poor performance continued during entire previous year. The FBR had fixed its target at Rs2475 billion in last fiscal year, which was revised downward to Rs2345 billion and again to Rs2275 billion. However, the tax department even failed to achieve its revised target by the end of June 2014 despite taking additional taxation measures. The FBR collected Rs 2266 billion during previous fiscal year 2013-14 against the twice-revised tax collection target of Rs 2275 billion, leaving shortfall at Rs9 billion.