Shabbar Zaidi warns tax defaulters of utility disconnections

Updated May 23, 2019

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The alarmingly low level of compliance with the tax laws lies at the heart of the country’s widening fiscal deficit. — DawnNewsTV/File
The alarmingly low level of compliance with the tax laws lies at the heart of the country’s widening fiscal deficit. — DawnNewsTV/File

ISLAMABAD: Amid record high fiscal deficit and declining government revenues, Federal Board of Revenue (FBR) Chairman Muhammad Shabbar Zaidi on Wednesday revealed that only 11.2 per cent of the total 348,174 industrial gas and electricity connections in the country are registered with sales tax authorities.

The alarmingly low level of compliance with the tax laws lies at the heart of the country’s widening fiscal deficit which has worsened to decade high.

As per the data shared by FBR chairman, of the total connections, approximately 341,174 are electric whereas around 7,000 are gas connections whereas only 38,937 are registered with sales tax authorities.

Zaidi said industrialists and manufacturers can whiten their sales tax liabilities by paying just 2pc tax under the Assets Declaration Ordinance, 2019 launched on May 15.

The chairman categorically warned that from July onward, FBR will take strict action against tax defaulters including disconnection of utilities.

“I will urge industrialists and manufacturers to take advantage of the scheme and clear their past sales tax liabilities by paying just 2pc tax”, the chairman said, adding the law would take its due course after the expiry of the scheme.

Following the expiry of the ordinance on June 30, all tax payments will be allowed with additional surcharge payment.

He also informed the gathering that there are currently 3.1 million commercial consumers in the country and the sales tax registration data related to these consumers will be shared by the FBR at some other point in time.

Moreover, with regards to complaints of harassment by tax officials, he said that he will review all of the measures utilised by these officials to audit businessmen.

Zaidi said that he had raised the issue of low return filings in the corporate sector with the Securities and Exchange Commission of Pakistan (SECP) chairman as only half of the 100,000 companies registered with the SECP file their returns.

The chairman said that, in case of failure to comply with the laws, SECP will either de-register non-compliant companies or FBR will begin legal action against them.

Spokesperson and Member Policy Dr Hamid Ateeq Sarwar also said that manufacturers with sales above Rs10m will have to register under the sales tax law adding that non-compliant manufactures will face strict penalty in the form utility disconnections.

Moreover, he said the FBR can also freeze bank accounts of unregistered manufacturers from July onwards.

Ateeq said there are more than 50m current account holders in the country of which only 80,000 file their returns.

He added that government has tasked FBR to increase total returns filers from existing 1.95m to 5m within the next two years.

Answering a question, the FBR chairman said that no tax amnesty is under consideration for smuggled vehicles.

He also added that Asset Declaration Ordinance, rules and declaration forms have been uploaded on the FBR website.

Real-time forex rate update

The Federal Board of Revenue has decided to electronically link its Customs portal WeBOC with the Treasury and Capital Markets Group of the National Bank of Pakistan (NBP) for real-time update of daily exchange rates of major currencies as soon as the same are notified.

An official statement issued on Tuesday said that settlement of payments for Pakistan’s international trade is done in foreign currencies.

Value of imported goods is converted to rupees, using latest exchange rate of major currencies notified by the Treasury of the NBP.

As per current procedure, exchange rates for various currencies are procured from Treasury and Capital Markets Group office of the NBP by Pakistan Customs on daily basis either manually or by downloading the same from the bank’s website.

It is then fed manually into WeBOC for utilisation in assessment of value of imports for calculating duties and taxes.

Necessary instructions have been issued to Director (Reforms and Automation), Karachi for development and deployment of required module in close consultation with the NBP.

It is expected that this reform initiative will improve the efficiency and transparency of the process, and will also preclude any possibility of errors/omission, added the announcement.

Published in Dawn, May 23rd, 2019