Plug tax evasion: Ordinance on the anvil to exchange FBR data with Nadra

ISLAMABAD: The government is working for the promulgation of an Ordinance for exchange of FBR’s data with Nadra for identifying 15 million potential tax dodgers on the basis of their income patterns.

With the help of Artificial Intelligence (AI), the income levels of 15 million un-registered tax dodgers will be ascertained for generating multi-billion rupees tax demands. Then the third- party auditors will verify tax demands in view of the income levels before serving tax notices. This would be followed by polite official letters to the nonfilers asking them to pay tax demands.

But the habitual offenders would be penalised for which different proposals are under consideration,” top official sources confirmed to The News here on Saturday. Stern actions under consideration would include blocking SIMs and denying electricity connections to the habitual tax defaulters.

According to independent tax experts, the exchange of FBR’s data with Nadra was one aspect but converting this bulk of data into taxability was a more complex subject. The data of each individual will have to be scrutinized to ascertain whether the income is derived from exempted sectors such as agriculture income, remittances coming from abroad or from inherited assets. So the devil lies in details and every case will require a lot of spadework to ascertain taxability otherwise it will again prove to be a futile exercise.

The FBR had also identified 7.2 million tax dodgers but the result of the exercise remain unknown so it will be premature as to how 15 million people will be brought under the tax net. This procedure was adopted by the former Chairman FBR Ali Arshad Hakeem but it failed to make any difference. Now the government will have to do something fundamentally different to achieve success.

However, when this scribe contacted Federal Minister for Finance and Revenues Shaukat Tarin on Saturday, he said that the Presidential Ordinance was under consideration for ensuring the exchanging FBR data with Nadra for broadening the tax base. He said that the data of 15 million potential tax dodgers existed but their incomes needed to determined with the help of Artificial Intelligence on the basis of which the tax demands would be raised. “The Ordinance will only facilitate exchange of FBR data with the Nadra,” said the minister.

It is relevant to mention that the Income Tax Ordinance 2001 does not allow the FBR to share its data with anyone.

Therefore enabling clauses will have to be inserted for the needful. Explaining the idea, Tarin said that the proposed Ordinance would cater to sharing FBR’s data with Nadra following which tax notices would be served to those who have taxable income but never bothered to file returns or pay due tax amount. He hoped that the majority of the people who would get the message would opt to pay due taxes. But for the habitual tax defaulters the long arm of law would take stern action, the minister warned and added different proposals were under consideration.

He ruled out the possibility for cancellation of CNICs or passports, but the proposal for not allowing electricity connections to habitual tax defaulters is under active review. To another question, he said that the PM was not so far briefed on the stern proposals against defaulters, although the premier had always extended support for moving with an iron hand against tax dodgers.

To another question about random audit cases selected by FBR through balloting in the current fiscal year, he said third-party auditors would be assigned to undertake this exercise instead of those from the FBR.

To a question for removing the conflict of interest, he said that the risk-based audit by the third party would be conducted on the basis of risk-based factors. If someone paid Rs 2.5 million tax but a third-party auditor assessed that the due tax amount stood at Rs 10 million then tax demand would be generated and the taxpayer would have to pay to avoiding any actions, he concluded.