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Only 42pc of registered firms file returns

February 24, 2019

KARACHI: Only 42 percent of the registered companies have filed their annual income tax returns to the Federal Board of Revenue (FBR) despite the fact that filing is mandatory even if a business is in the red, officials said.

The Taxpayers’ Directory for Tax Year 2017, issued by the FBR, revealed that a total of 37,130 corporate entities declared their annual income and assets for the year. There were 87,622 companies registered with the Securities and Exchange Commission of Pakistan (SECP) as of June-end 2018.

Every company registered with SECP is required to file return of income for a tax year under a law (section 114 of Income Tax Ordinance 2001).

FBR officials said every corporate entity is required to file annual returns even if it doesn’t earn profit.

They said most of the non-compliant companies that didn’t file income tax returns have either closed down their businesses or are dormant.

The FBR have been urging taxpayers for the last few years to file their income tax returns. But, it failed to increase the number of returns from corporate sector.

The apex tax authority set two different withholding tax rates for filers and non-filers on banking transactions to bring non-filers into the net.

The taxation helped in improving revenue collection. The FBR recorded Rs6.156 billion in withholding tax collection from non-cash banking transactions in the July-January period of the current fiscal year.

The sources said companies get registration with the SECP in order to fulfill requirement for getting award of government contracts. They said some are established and registered only to obtain tax refunds on bogus invoices.

Sources further said those who filed returns from corporate sector declared nil or zero return as per the latest directory.

“It is alarming,” a source said.

The sources said the FBR is in consultation with the SECP to obtain data of all the corporate entities to enforce income tax returns.

Tax experts attributed the low turnout in filing of returns to policy flaws in the FBR.

They said a score of companies are registered with the SECP, but they could not start their businesses.

“It is necessary to see how many companies are filing statements even with the SECP,” Zeeshan Merchant, vice president of Income Tax Bar Association (KTBA) said.

Merchant agreed that a large number of registered companies are also dormant or defunct.

KTBA official said several companies are not filing returns due to fear of difficulties after entering into the tax base.

“Lack of human resources in the FBR posed serious enforcement issues.”

The latest tax directory revealed that around 55,760 association of persons filed their income tax returns for the tax year 2017. Total 1.68 million taxpayers are salaried or business individuals.