The 3rd phase of tax survey and documentation of national
economy which was to start with effect from March 1, 2001 as per earlier
schedule has now been postponed to July 1. The reason for this postponement, as
disclosed by the spokesman Mr. Wakil Ahmed Khan, member sales tax Central Board
of Revenue (CBR) is that the work related to the first two phases has not yet
been completed as over 300,000 forms out of 9 lacs distributed in the second
phase are still to be retrieved from the tax payers. The argument hardly sounds
This delay, mainly due to the inefficiency of the CBR
officials will however provide a justification to them for their failure to meet
the tax collection target for the financial year 2000-2001 ending on June 30
next. For this financial year revenue collection target was initially fixed at
Rs. 450 billion which was later revised to 435 billion and then further down to
417 billion. Although the spokesman insists that CBR will be able to achieve the
revised target but it seem rather impossible as during the first nine months
July-March the actual collection has been approximately Rs. 285 billion.
According to experts they would hardly meet the figure of Rs. 400 billion.
Presiding over the meeting of the Ministry of Finance and CBR
officials to review the progress on the ongoing tax survey in Islamabad in Nov
last the Chief Executive Gen. Pervez Musharraf exhorted the participants that
they must ensure an increase of Rs. 100 billion on the revenues during the
current fiscal year as targeted in the budget. He, however, assured that the
ongoing tax survey for documentation of economy will continue as planned at all
costs. The CBR will be provided full support in their task but they must come to
the expectation this time.
The Central Board of Revenue (CBR) expected a collection of
revenue of Rs. 435.6 billion during 2000-2001 against the actual collection of
Rs. 345.51 billion during the last financial year — an addition of Rs. 90
billion to be raised through on going tax surveys during the current financial
year. They expected to increase revenue to Rs. 550 billion in 2001-2002. The CBR
officials assured the Chief Executive that these targets could be achieved
provided the task of documentation of economy was carried out in all sectors of
economy with full backing and support of Armed forces.
While the budget estimates for the current fiscal year were
generally believed to be too optimistic, both the CBR and Minister for Finance
Mr. Shaukat Aziz sounded more than confident that will not only achieve but
exceed the target fixed. Finance Minister told newsmen that the projected 24 per
cent rise in tax revenue "was aggressive but not unrealistic" pointing
out that without much effort this year there was a 17 per cent increase in
revenues. If we don't plan aggressively we will never get out of this quagmire
we are in, he added.
In Oct. 2000 when the initial exercise of first phase of tax
survey in 13 major cities was nearing completion the CBR bosses appeared more
than happy as, according to them, they had detected massive income tax evasion
by those who had declared their assessable income through tax survey forms. On
the basis of the information provided by a senior official of the CBR, this
correspondent reported in Page (Aug 21-27/2000 issue).
For the year 2000-2001 the government has fixed a target of
Rs. 435 billion which is Rs. 90 billion more than the actual receipts last year.
There was almost a consensus between the CBR and the Finance Ministry that the
revenue generation would exceed by over Rs. 100 billion as a result of the
ongoing tax surveys. The authorities sounded so confident that they made CE to
believe that revenue generation could be increased to Rs. 550 billion for the
year 2001-2002 when the tax survey exercise would be completed throughout the
country. According to the CBR the initial survey of the first 13 big cities
which was completed by end Oct 2000 had revealed massive tax evasion and the
optimism that revenue generation could be increased to Rs. 600 billion during
the next 2 years (during which period all tax evaders will be brought into tax
net) was fully justified. A senior member of CBR confided to this correspondent
in Oct last, "We never thought tax evasion was of that high level. Now
there should be no problem in adding Rs. 100 billion to the national revenues
during the current financial year".
During the first phase of tax survey of around 700,000
households and business houses in 13 big cities were given survey form and about
542000 were received back before 15 Oct which included about 400,000 from
residential areas. The automation wing of the CBR announced in Nov. that only as
a result of scrutiny of around 400,000 houses in posh areas of 13 cities, about
100,000 notices are to be issued to either tax dodger, non filers and under
filers. The survey forms received from commercial and Business Community are yet
to be checked and scrutinised where chance of tax evasion are much larger.
According to the initial scrunity by Pakistan Revenue Automation Ltd. (PRAL)
more than 25000 owners or tenants of houses built on a plot of 1000 yards or
more are just not in the tax net although they are getting rents or paying rents
that warrants tax liability of the owner or tenants, which is taxable. Similarly
the analysis showed that of all property owners 25 per cent declared the income
to be less than Rs. 50,000 the 60 per cent said their income was less than one
lakh rupees and 15 per cent declared the income to be less than three lakh
rupees. Obviously, PRAL suspects, that there was gross under reporting. This
would involve examination of tax records and subsequent action on defaults.
Similarly PRAL found that of the one lakh new national tax numbers given to
individuals, 75,000 persons did not pay tax in the past and it is to be
ascertained if they filed any tax return for 2000-2001 assessment year or not.
A different picture was however, presented when CE was
briefed on tax survey estimates and revenue generation position last month. He
was reportedly told that because of slow response on tax survey the projected
increase of Rs. 90 billion may not be achieved during the current fiscal. The
new estimate was put at Rs. 50 billion to which CE did not agree and he directed
the CBR Chairman to speed up the process, take his staff to task and come up
with the desired level.
CBR Chairman Riaz Hussain Naqvi, while responding to the
Chief Executive Pervez Musharraf's question of revenue shortfall, told him that
slow-economic growth, lesser imports, especially of edible oil, problems with
the sugar industry, expectations of tax payers to further extend income tax
returns date, concessions given to various classes, especially the traders and
delay in start of tax survey were the main causes. Explaining the reasons he
said that economic growth, a factor in determining the revenue collection could
not reach the targets. Furthermore, the imports were also lesser than it was
envisaged when the policies were drafted. Especially, the edible oil import was
much less than the anticipations. In the sugar industry, late start of crushing
season caused delay in their filing of returns. CBR did not extend final dates
of filing returns in spite of their strong demand.