FBR isn’t what it seems to be, claim tax officials

ISLAMABAD: Widespread pessimism about the Federal Board of Revenue’s inefficiency in collecting taxes is in stark contrast with the optimism of tax authorities who say they’re on the “charm-offensive” against the high-profile tax evaders but in a low-profile mode.
Since the PML-N government is considered pro-business, a well-placed official explained, “We are under instructions to be soft in dealing but firm in actions”.
“Name any big business that has been left untouched,” challenged a key tax administrator when The News asked about FBR’s reluctance to go after the fat cats evading taxes, courtesy their connections in the corridors of power.
Then the official named a few high and mighty feeling the heat from the FBR. “We registered an FIR against the brother-in-law of a sitting chief minister,” he said in oblique reference to a sugar mill whose owner allegedly evaded Rs110 million tax. Another sugar mill is under investigation for the tax evasion to the tune of Rs130 million.
A top businessman notorious for tax evasion escaping accountability each time has deposited Rs1.5 billion taxes more than his previous year’s, according to a tax administrator who said investigations are also in progress about his undeclared bank accounts and hidden assets.
Another big business is also facing inquiries for tax evasion, the official said, adding that around 200,000 rich have been brought in the tax net through gathering information from different sources increasing the FBR’s tax to GDP ratio from 8.4 percent to 9.45 percent.
The tax to GDP ratio is a major indicator to measure the performance of revenue collection. If the revenue collection from the sources outside the FBR domain like Gas Infrastructure Development Cess is also calculated, tax to GDP ratio exceeds 10 percent, claimed the tax official.
“Our target is to take this ratio to 13 percent in next two or three years. Attaining that target means we will be in the business,” he said.
As Turkey has emerged as a success story in developing world by doubling tax to GDP ratio to 23.5 percent in almost 15 years through taxing goods/services and social-security contributions, it didn’t reach to this point overnight, the FBR officials argue.
“We had a detailed discussion with them and came to know that Turkey gained average increase of 0.5 percent annually. What it requires is the political stability and consistent policies,” said a leading tax administrator.
Asked why the FBR is hesitant to publicise the actions taken against the tax evaders, the official cited political reasons. He said the PML-N government is considered business friendly. Any effort to name and shame the big fish will tarnish its image as if it has launched a crackdown against the business class.
“The public at large may not know what we do, the reality has dawned on the potential tax evaders that they are on FBR’s radar,” he said.
If the steps taken by Finance Minister Ishaq Dar are any guide, the government appears serious as the decisions right from publishing the tax directory to the imposition of withholding tax on the banking transactions of the non-filers that has earned the ire of traders in particular.
The predictions were rife that the government will finally bow to the pressures of the traders. Zubair Motiwala, a Karachi-based business leader was vocal.
“I have seen how the government operates from inside and out for decades now, they are very scared of strikes and outcries of this sort. I’m telling you that this will be withdrawn,” he had told a newspaper.
However, the government resisted this pressure showing flexibility only to the point of cutting it to 0.3 percent from 0.6 percent until September 30, setting three-month deadline for the traders to file their tax returns. Although, splinter groups of the traders staged strikes even afterwards demanding its complete withdrawal, they failed to pressure the government into submission.