ISLAMABAD: Over 10,000 employees of Pakistan’s top tax authority have been identified as non-filers of income tax returns in the last two years, Dawn has learnt from knowledgeable sources.

This raises serious concerns about the effectiveness of efforts to document the economy and broaden the tax base particularly when the tax authority itself struggles to ensure its employees are on the tax roll in the tax years — 2022 and 2023.

The trend of non-filing is particularly prevalent among officials below the grade-17 level across the country. Despite the high incidence of this issue, the Federal Board of Revenue (FBR) has yet to take action against these non-compliant employees.

It is worth noting that the total workforce of the tax authority stands at 25,000 nationwide. Of these, the officers above grade 17 are 1,700.

Internal non-compliance hurting efforts to broaden tax base

The non-filers officers of grade 17 and above were approximately more than 500 in 2022. However, the number of non-filers in this category is still at 300 for 2023. Only 1,400 officers have filed their tax returns despite a special extension available to them until Dec 31.

In the tax year 2022, there were over 500 non-filing officers of grade 17 and above. However, this number has seen a slight decrease to around 300 for 2023. Despite the special extension granted until December 31, only 1,400 officers have filed their tax returns for the tax year 2023. This highlights a persistent issue of tax non-compliance among higher-grade officers.

For the tax year 2023, the Inland Revenue Service has seen a return filing compliance rate of 88pc among officers, while the customs group officer category has a compliance rate of 80pc. This relatively high compliance rate for 2023 can be attributed to the special extension granted by the FBR chairman, which allowed employees until Dec 31, to file their returns.

Habitual non-filers

This extension is in contrast to the standard extension deadline for return filing, which expired on Oct 31 for common citizens.

Among officials below grade 17 across the country, the non-compliance rate for tax return filing is between 60 to 70pc. This category comprises approximately 23,300 employees nationwide. However, official estimates indicate that around 10,000 employees in this category are habitual non-filers.

A recent exercise conducted by the Chief Commissioner of the Regional Tax Office-1 in Karachi revealed that nearly 307 officers failed to file their tax returns for 2022 and 2023. If this exercise were to be extended to 22 RTOs, two Corporate Tax Offices (CTOs), and three Large Taxpayer Units (LTUs), the number of non-compliant officials could potentially reach the thousands.

The FBR letter issued said that those who failed to file their returns before Dec 31 will be subject to penalty. However, the non-compliance level within FBR shows that these non-compliant officers and officers will broaden the narrow tax base of the country.

Talking to Dawn, the Pakistan Tax Bar Association (PTBA) President Anwar Kashif Mumtaz expressed concerns over the perceived dual standards of the FBR in the submission of income tax declarations for the tax year 2023.

The Federal Board of Revenue (FBR) officials were given an extension until December 31, 2023, to file their tax returns, a privilege not extended to ordinary taxpayers whose deadline expired on November 30, 2023.

Initially, the deadline for filing income tax returns was extended to Nov 15 for individuals who obtained permission from commissioners of income tax. This extension was then pushed to Nov 30. However, upon identifying non-compliant officers and officials, the deadline was further extended exclusively for the tax officials until Dec 31.

Mr Mumtaz has expressed concern over this discrepancy, viewing it as a contradiction to the tax authority’s commitment to transparency.

Published in Dawn, December 7th, 2023