Cases of taxpayers hiding real income to be referred to NAB

ISLAMABAD: In a major policy shift, the government has decided to involve the National Accountability Bureau (NAB) in penalising those taxpayers who intentionally hide their income to avoid paying due taxes – a decision if prudently implemented may ease the financial woes of the government.

Federal Board of Revenue (FBR) Chairman Salman Siddique said on Saturday that during the process of trailing 2.3 million tax dodgers, the FBR would refer all those cases to NAB in which the income tax return filers try to hide their real income.

The government has identified 2.3 million tax evaders, out of which 700,000 will be taken to task during the next financial year. So far, the FBR has sent 71,000 legal notices, out of which 17,116 have been dispatched to Karachi.

Under the law, the FBR will send notices to the evaders for filing income tax returns, paving the way for raising provisional tax demand against them. This will give an opportunity to the potential taxpayers to either contest the demand or pay the due amount. Tax experts fear that the habitual dodgers may show less income in their returns.

“We have estimated collection of Rs50 billion through improved administration and recovery of due taxes from the identified 2.3 million non-filers,” said Salman Siddique. He said the government would also launch a centralised audit of all taxes from July 1 in order to ensure the achievement of the tax collection target of Rs1,952 billion.

In 2005, the FBR had abandoned the audit of taxpayers and opted for the Universal Self-assessment Scheme, relying on the ‘honesty of taxpayers’. The policy has been sharply criticised by tax experts who advocate a prudent use of audit policy.

Siddique said the FBR has so far raised Rs3 billion provisional demand by scrutinising the profile of non-filers. “In a population of 180 million, only 2.9 million have the national tax number, of which merely 1.5 million file income tax returns,” said Finance Minister Dr Abdul Hafeez Shaikh.

March 15 measures to help achieve target
The FBR chairman said March 15 tax measures were an essential part in achieving next year’s tax collection target of Rs1,952 billion. “Continuation of the sales tax exemption withdrawals of March 15 will fetch revenue of Rs81 billion next year,” he added.

On March 15, the FBR slapped tax on sales of fertilisers, pesticides and tractors and five per cent tax on five zero-rated export-oriented sectors – textile, leather, surgical and sports goods and carpets.

Siddique said the FBR would achieve the tax target of Rs1,588 billion by June 30 and Rs25 billion would be recovered from the short-filing withholding agents. So far, the FBR has collected Rs1,318 billion and it needs to collect Rs270 billion in June to reach the target, which has been revised downwards three times.