Finance minister Aurangzeb says non-tax filers won’t be able to buy vehicles, properties, mutual funds, and open current bank accounts.  Unregistered manufacturers and sellers will also face blockage of utilities, attachment of properties, and sealing of premises.  Says number of tax filers double from 1.6m to 3.2m this year.  Decision taken to abolish 150,000 posts and dissolve one ministry.

ISLAMABAD  -  Federal Minister for Finance and Revenue Muhammad Aurangzeb Sunday warned the manufacturers and sellers that non-registration would lead to blockage of utilities, attachment of properties, and sealing of premises as he announced stricter measures to boost the tax collection. He also said that non-tax filers will not be able to buy vehicles, properties, mutual funds, and open current bank accounts. They will have difficulties in cash withdrawals and deposits, he said.

Addressing a press conference in the federal capital, he said that total tax evasion for individuals currently stands at Rs 1.3 trillion. He said a large number of manufacturers and traders are not registered with the sales tax. The minister said that only 14 percent of 300,000 manufacturers are registered with sales tax. Similarly, he added, only 25 percent of 300,000 sellers are registered with the sales tax. “Going forward with minimum disruption… manufacturers will be allowed to sell to registered whole-sellers only. Non-registration would compel us to block utilities, attachment of properties, sealing premises and appointment of receivers,” he said and added, “That would be the consequence of not registering”.

Giving warning to non-registered people, the minister said the government had ended all the exemptions on tax. “It is not appropriate to treat taxpayers and non-taxpayers alike. We are left with no option but to expand the tax net,” he made it clear.

Federal Board of Revenue (FBR) Chairman Rashid Langrial was also present on the occasion.

The minister declared a war on cash to ensure documentation of the economy. “We have to declare war on cash if we have to move towards G20. We have to move to documentation if we have to join the comity of nations,” the minister said. For under-filers, he said the government will reduce human intervention by creating a digital interface. Through digital algorithms, he said, the government will gauge the difference between what people have declared and the actual value of their assets. He said that such measures were important for citizens’ rights so that tax collectors would not go and harass them. He said the interface would help in knowing how many houses and cars an individual owns; how many foreign trips he makes [annually] to determine the actual tax he should have paid. “All we are doing is now making sure that we use this data in the correct way to get our tax to GDP ratio up.”

The minister said that the rightsizing committee has decided to abolish 60% of vacant seats (150,000 posts) as well as dissolve one ministry (the Capital Administration and Development Division (CADD) and merge two others. “The rightsizing committee has reviewed six ministries so far, in the first phase. Dissolution of one ministry has been approved, while two others will be merged,” he said.

Aurangzeb said the government’s measures including securing the International Monetary Fund (IMF) bailout package would bring economic stability in the country. He said the government would have to boost the efficiency of the Federal Board of Revenue (FBR) and for that reason 2,000 chartered accountants would have to be hired. “The FBR’s ability to audit will also be enhanced. Hence, 2,000 tax audit experts will be appointed in the FBR.”

The finance minister told the media that tax filers for the current fiscal year had nearly doubled from 1.6 million to 3.2 million.

Citing a report the FBR chairman presented to the prime minister on non-filers and under-filers, the minister said that the estimated tax evasion of individuals who under-file amounted to Rs1.3 trillion. He said that since the estimated amount for cash-in-circulation was around Rs9 trillion and the FBR budget was Rs9.3 trillion, one could estimate that the actual size of the country’s economy stood at more than $700 billion. Regarding inflation and its downward trajectory, he said that it was down to single digits and was going to “subside more”, adding that it happened on the back of the successful completion of the stand-by agreement with the IMF. He noted that a new and extended IMF programme was critical to bring permanence to the macroeconomic stability in the country and execute structural reforms.

He said the federal government in collaboration with provincial administrations will soon sign a ‘National Fiscal Pact’, aimed at bringing uniformity to provincial taxes and boosting revenue collection. The agreement is set to formalize a unified approach between the federal government and all four provinces, with a focus on imposing taxes on agriculture and ensuring growth in provincial revenues, he added.

Aurangzeb also talked about the ongoing efforts to combat smuggling, which has a Rs750 billion impact on tax revenue. The government is establishing digital checkpoints at major border crossings to curb illicit trade, he said.