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November 3, 2018

FBR to seek PM’s approval on new reforms


November 3, 2018

ISLAMABAD: Tax managers are bracing up for a crucial meeting with the Prime Minister Imran Khan upon his return from China to get his consent on revenue generation reforms as the country is likely to begin bailout talks with the IMF from next week, people in the know said on Friday.

Sources said the Prime Minister Khan will be given “extensive” briefing by the top management of the Federal Board of Revenue (FBR) next week on the proposed tax reforms, administrative measures to achieve the desirable target and increase tax-to-GDP ratio. Currently, the premier is on a five-day visit to China to seek financial assistances from the neighbouring country.

“The IMF (International Monetary Fund) team will be arriving Islamabad on November 7 to start formal talks with Pakistani authorities on the next bailout package and on the same day the FBR will brief the PM about its strategy to bring reforms into FBR and broaden the narrowed tax base,” a well-placed source told The News.

The officials confirmed that performance of the apex tax authority, FBR, will be key area of discussion during the upcoming talks with the IMF as the tax machinery has abysmally failed to broaden its tax base and tax-to-GDP ratio for the last several years.

The tax collection machinery has been facing a constant challenge in achieving desirable revenue collection target. It faced revenue shortfall of more than Rs60 billion in the first four months of the current fiscal year of 2018/19. The FBR managed to collect only Rs1.106 trillion in the July-October period as against the target of Rs1.166 trillion.

The government is facing a daunting task to generate Rs4.4 trillion in revenue in the current fiscal year and to contain budget deficit at 5.1 percent, compared to the earlier target of 4.9 percent, and as against 6.6 percent recorded in the last fiscal year of 2017/18.

Sources said the FBR will brief PM on effective utilisation of data of all public sector organisations to broaden the tax base and identify tax evaders.

The FBR will inform PM about the progress on cases related to high net-worth evaders, who did not file tax returns. This exercise will vigorously be extended on continuous basis to identify major non-filers who draw huge amounts of income and own high value assets, the sources added.

The FBR will also share progress report with the PM on actions against tax evaders who have purchased properties valuing more than Rs20 million, bought 1,800 CC or above engine cars, or received rent to the tune of Rs10 million or more in a year but have not filed their tax returns and therefore are not in the active taxpayers list.

“The FBR has already launched tax recovery drive against the big tax evaders without any discrimination,” an official said.

The FBR has estimated Rs37 billion in tax demand from audit of high net-worth individuals. Expected revenue generation from liquidation of litigation cases would generate Rs20 billion. Alone revenue from tobacco sector was estimated at Rs14 billion. The cumulative effect of such measures would result in Rs71 billion in revenue generation.

Sources said 373 cases have been identified as high net-worth evaders who never bothered to file tax returns. The FBR has prepared a list of 148 cases of non-filers who invested in properties (above Rs20 million) and luxury motor vehicles (above 3,000 cc) under the phase-I.

In phase-II, the FBR has identified 75 tax evaders across the country. List of 75 cases of non-filers individuals was ready, including 59 buying cases of properties (with registered value of Rs20 million and above), 10 motor vehicle purchase cases (1,800cc and above) and six rental income cases (annual rent of Rs10 million and above).

In phase-III, the FBR picked 220 tax evaders. It has finalised a list of 220 cases of non-filers, including 29 cases related to the purchase of properties (with registered value of Rs20 million and above) and 191 cases of motor vehicle (1,800 cc and above) purchases. The FBR has also identified 22 high-end plazas including eight in Karachi, 12 in Islamabad and two in Lahore under the phase-IV.

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