KARACHI: Meeting the current year’s tax revenue target is going to be challenging task for the government since it has committed to increasing the Federal Board of Revenue (FBR) collections by almost Rs1 trillion at a time the economy remains mired in low growth and high inflation, while the effects of Covid-19 still linger.
“Look at the condition of the economy,” says Dr Waqar Masud, the newly-appointed Special Assistant to the Prime Minister (SAPM) on Revenue. “Last year, we had Rs400 billion additional taxes if we remove administrative measures, tax elasticity to GDP has now become negative.”
Speaking to Dawn via telephone, he says raising incremental revenues under present economic conditions presents challenges. “Under these conditions, if we have even four per cent growth in FBR revenues in first quarter compared to first quarter last year, that is still okay performance. Some pick up is taking place,” he says when listing the frailties in the economy, “such as fertiliser, but electricity demand has dropped by 1.8pc in September”.
He says the thrust of his efforts is in broadening the tax base, bringing in new taxpayers rather than squeezing out more tax from those who are already paying. The access that the FBR has to various databases provides him with some amount of leeway in searching out those who should be shouldering the burden more.
“We have a very large population of prospective taxpayers in our database,” he says. “We get 2.7 million returns of which 1m are filing nil returns.”
By triangulating the data of those filing returns from other databases, he aims to ferret out millions of more taxpayers.
“Household and income expenditure survey shows 21m individuals with annual household income of Rs400,000 or more, which is in the taxable limit, we have 6.4m NTN holders, which also shows a huge population of potential taxpayers, 5m people are paying withholding taxes every year,” he says.
“We ran the information of those filing nil returns thru our withholding tax database,” he says citing one example of how this triangulation works. “240,000 of them were found who were subjected to withholding taxes to a total of Rs14bn collectively, which makes it an average of Rs58,300 withholding tax per individual.
“These people must be making purchases of Rs580,000 at least meaning they must have an average income higher than this, meaning their nil returns are suspect.”
He calls this the ‘low hanging fruit’ of his revenue effort. The “FBR now has data from the Lahore Development, Capital Development, Karachi Development and Karachi Building Control authorities, revenue boards and all other registration authorities, imports of cars and much else. I have data of 8.9m people from withholding tax database, property purchasing and registration of vehicles. I have three-year data, in which I have 1.5m filers, so I have scope of 7.4m new potential filers.”
The FBR is sitting on a very large database of potential taxpayers he says. “We are reaching out to these people, asking them to step forward and start filing returns and paying their taxes, or else we will begin legal action against them.”
Published in Dawn, October 27th, 2020