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Sunday April 21, 2024

WB, FBR agree to identify new taxpayers

The FBR has restructured its Audit Wing to include a Compliance Unit and Audit Unit

By Mehtab Haider
February 17, 2024
A person enters the building of the Washington-based global development lender, The World Bank Group, in Washington. — AFP/File
A person enters the building of the Washington-based global development lender, The World Bank Group, in Washington. — AFP/File

ISLAMABAD: The Federal Board of Revenue (FBR) has accepted demands of the World Bank (WB) for the identification of millions of new taxpayers through automated data sharing and ICT-based business intelligence under $400 million Pakistan Raises Revenue Project (PRRP).

“Numbers of new taxpayers, including individuals and firms with income above the taxable threshold who receive notices to register, are added to the tax register and pay taxes during the fiscal year. The annual targets are not cumulative,” top officials showed records of the WB-Pakistan signed revised PRRP and stated on Friday.

Under the WB agreement, the Independent Verification Agents will confirm the number of new taxpayers who receive the FBR notices, register, file, and pay taxes each year. “The nil filers will also be considered,” stated the document. The official sources said that there is a persistent dilemma in the FBR with the concept of filer and non-filer as millions of filers come into the tax net to reduce the tax burden at the time of making any taxable transactions but then prefer to exit or use to file nil returns in subsequent years.

The IVA will be mandated to confirm the numbers of new taxpayers who received the FBR notices or approached through other measures and have filed and paid their taxes.

Under the WB’s condition of the project loan, FBR has adopted a regulation on risk-based selection of audit cases and limited the selection to only 10 percent subject to clearance by the Member audit. The FBR has restructured its Audit Wing to include a Compliance Unit and Audit Unit. The FBR has completed 85 percent comprehensive field audits of Large Taxpayers and 15 issued-oriented audits for five years selected by the risk based selection tool and monitored by the Compliance Unit through AMIS with associated reports submitted to FBR management. An audit case is considered completed after the final audit report is submitted to FBR management irrespective of whether the taxpayer challenges the findings of the audit in the court.

The World Bank will verify the adoption of regulation-based selection of audit cases and limiting audit cases selected outside the risk-based tool to up to 10 percent of total cases in a fiscal year.

Now the question arises that the WB’s project period extended up to June 2025 and it is yet to see how many potential taxpayers added into highly skewed and narrowed tax base whereby out of over 240 million population only 4 to 5 million filed their returns having 1 to 2 million those who preferred to file just nil returns. These nil filers are only cheating the tax system for the purpose of becoming alive in the list of active taxpayers list.