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The Federal Board of Revenue (FBR), the federal tax collection agency in Pakistan, has received 1.7 million income tax returns by the December 8, 2020 deadline, which is 40 percent less than last year. In 2019, 2.9 million income tax returns were filed. Following the submission of low income tax returns this year, questions have been raised about the federal government's achievement of the tax target in the current financial year.
It may be recalled that the Prime Minister of Pakistan Imran Khan had claimed to triple the collection of taxes before coming to power and he had claimed in several of his statements that within a year after the PTI government came to power. It will collect more than Rs 8,000 billion in taxes. The federal government of Pakistan has set a target of collecting Rs 4,900 billion in taxes this financial year. Taxes collected in the first five months of this fiscal year are four percent higher than in the same months last year.
However, to achieve the tax target for the entire financial year, Pakistan has to collect 23% more tax than the previous financial year, which according to tax experts and economists is very difficult. The submission of low income tax returns by the December 8 deadline also indicates that it will be very difficult to achieve the tax target in this year's budget.
Overall tax collection situation
Looking at the tax collection situation in Pakistan over the last few years, there has been no significant increase in tax collection in the last three financial years. In the financial year 2018, the tax collection was 3842 billion, while in the financial year 2019, its collection decreased by 13 billion when the total tax was 3829 billion. In fiscal year 2020, the total tax collected was 3997 billion.
Ashfaq Tola, an expert on tax matters, said that if the amount of sales tax refund was deducted from the tax collected in the financial year 2020, the value of the remaining tax would be less than in the previous financial year.
Talking about the relationship between tax returns and tax collection, Ashfaq Tola said that submission or non-submission of returns has nothing to do with tax collection and since the government has provided facilities for filing files, many people have also opted for zero tax. Submit returns.
Rehmatullah Wazir, a former member of the FBR's tax policy, said that the tax collected with the statements is very low.
However, according to experts, the number of tax returns must represent the public's confidence in the country's tax system and the tendency to collect taxes.
It should be noted that the tax collected in Pakistan in the last financial year of about Rs 4,000 billion is much less than the target which was set at Rs 5,400 billion in this year's budget and then revised and reduced.
The target was further reduced to Rs 3,900 billion due to the lockdown in the country caused by the corona virus and the consequent slowdown in the economy. Due to low tax collection in Pakistan, there was no increase in the country's tax-to-GDP ratio. According to the FBR's annual revenue book data, Pakistan's tax-to-GDP ratio fell to 9.6 percent in the last fiscal year, partly due to the economic crisis caused by the corona virus. However, the rate was not encouraging even before the last fiscal year of coronavirus infection.
According to Rehmatullah Wazir, one of the major reasons for the decline in the tax-to-GDP ratio in Pakistan is that the share of the provinces is negligible. Citing the example of India, he said that among the taxes collected at the central level, the share of the provinces in the tax-to-GDP ratio is six per cent and in Pakistan it is barely one per cent.
Talking about the submission of tax returns, Ashfaq Tola said that the returns are very small in terms of our population but the government will have to simplify the system for its submission. Former Pakistani Finance Minister Dr. Hafeez Pasha said that the only reason for the low collection of income tax returns this year seems to be the impact on people's employment due to the corona virus. He said that a large number of people lost their jobs due to the corona virus and many businesses were shut down due to which they submitted less income tax returns. He said that in the current situation, the increase in statements could not be expected.
Why tax collection is not increasing in Pakistan?
Talking about the reasons for non-significant increase in tax collection in Pakistan, Dr. Hafeez Pasha said that it is not possible to increase tax collection unless the economy of the country is fully documented. He also criticized the FBR's tax system, which he said was a major obstacle to increasing tax collection in the country. He said that taxes were being collected in a wrong way in Pakistan.
Hafeez Pasha said that a person has to pay tax for using a mobile card here but the owner of four hundred acres does not pay tax. According to him, the agriculture sector earns more than Rs 900 billion annually but its share in the country's total tax is only Rs 2 billion.
Ashfaq Tola said that in a country where 38% of the gross national product (GDP) does not pay taxes, how can one expect a big and significant increase in tax collection.
When asked if people do not pay taxes because the general impression is that governments are corrupt and tax money is wasted, Ashfaq Tola said that those who say so are themselves corrupt because they are doing their part.
They don't pay taxes but say that the governments here are corrupt. He said that in developed countries of the world people file taxes out of fear of law but in Pakistan on the contrary there is no rule of law so people are not afraid of any punishment for non-payment of taxes. He said that the proportion of direct or indirect taxes in Pakistan is high because people do not pay indirect taxes.
Ashfaq Tola said that if Rs.1000 billion came from income tax, then the amount collected in the form of direct taxes would be enough to benefit the people. He said that the governments themselves do not want to work here. Talking about the Tax Reform Commission in 2016, he said that the commission had worked hard to formulate recommendations but these recommendations have not been implemented yet.
FBR spokesman Nadeem Rizvi was asked about meeting the annual tax target, which he said would be known in June. On the other hand, Rehmatullah Wazir said that distribution of taxes in Pakistan is a big problem. According to him, taxes on agriculture and services are within the purview of the provinces which do not pay much attention to tax collection from these sectors even though they play a significant role in GDP.
Image source Getty Images ,
By the December 8, 2020 deadline this year, 1.7 million income tax returns have been filed
Rehmatullah Wazir said that the provinces get huge amount of money under NFC award so they do not hesitate to collect maximum tax from these sectors within their limits. He said it was true that there was no state writ so people did not pay taxes. "When they see that the state cannot establish its writ to protect human lives, how will it be able to collect taxes through penalties and that is the biggest problem in tax collection in the country at the moment."
"During his tenure, he was asked by big industrialists why he should pay taxes when we pay the security guards for our safety, the roads are broken and there is no infrastructure," he said.
Will the government be able to meet this year's tax collection target?
Pakistan's Prime Minister Imran Khan had claimed to have collected Rs 8,000 billion in taxes in one year before coming to power, but his government has been able to increase tax collection very little in its first two fiscal years.
In the last year of Nawaz League's rule, the tax collected over Rs 3,800 billion reached barely Rs 4,000 billion at the end of last year. The government has set a target of collecting Rs 4,900 billion in taxes this year.
Achieving this goal, tax expert Ashfaq Tola said, does not seem possible in practice. He said that the current economic team is not special enough to achieve this big goal. He said that it was also strange that those who were called 'thieves and corrupt' increased the tax collection from Rs 1900 billion to Rs 3800 billion in their time.
Ashfaq Tola said that giving a good presentation in English would not meet the tax target. Must have complete knowledge.
Rehmatullah Wazir said that so far there has been a four per cent increase in tax collection while the country's tax collection needs to increase by more than 22 per cent to achieve the target. He said he did not think the target set for the current year would be achieved.
When contacted, Dr. Waqar Masood, Special Assistant to the Prime Minister for Revenue, said that he was busy and would discuss the matter in detail when the time came.
www.bbc.com
It may be recalled that the Prime Minister of Pakistan Imran Khan had claimed to triple the collection of taxes before coming to power and he had claimed in several of his statements that within a year after the PTI government came to power. It will collect more than Rs 8,000 billion in taxes. The federal government of Pakistan has set a target of collecting Rs 4,900 billion in taxes this financial year. Taxes collected in the first five months of this fiscal year are four percent higher than in the same months last year.
However, to achieve the tax target for the entire financial year, Pakistan has to collect 23% more tax than the previous financial year, which according to tax experts and economists is very difficult. The submission of low income tax returns by the December 8 deadline also indicates that it will be very difficult to achieve the tax target in this year's budget.
Overall tax collection situation
Looking at the tax collection situation in Pakistan over the last few years, there has been no significant increase in tax collection in the last three financial years. In the financial year 2018, the tax collection was 3842 billion, while in the financial year 2019, its collection decreased by 13 billion when the total tax was 3829 billion. In fiscal year 2020, the total tax collected was 3997 billion.
Ashfaq Tola, an expert on tax matters, said that if the amount of sales tax refund was deducted from the tax collected in the financial year 2020, the value of the remaining tax would be less than in the previous financial year.
Talking about the relationship between tax returns and tax collection, Ashfaq Tola said that submission or non-submission of returns has nothing to do with tax collection and since the government has provided facilities for filing files, many people have also opted for zero tax. Submit returns.
Rehmatullah Wazir, a former member of the FBR's tax policy, said that the tax collected with the statements is very low.
However, according to experts, the number of tax returns must represent the public's confidence in the country's tax system and the tendency to collect taxes.
It should be noted that the tax collected in Pakistan in the last financial year of about Rs 4,000 billion is much less than the target which was set at Rs 5,400 billion in this year's budget and then revised and reduced.
The target was further reduced to Rs 3,900 billion due to the lockdown in the country caused by the corona virus and the consequent slowdown in the economy. Due to low tax collection in Pakistan, there was no increase in the country's tax-to-GDP ratio. According to the FBR's annual revenue book data, Pakistan's tax-to-GDP ratio fell to 9.6 percent in the last fiscal year, partly due to the economic crisis caused by the corona virus. However, the rate was not encouraging even before the last fiscal year of coronavirus infection.
According to Rehmatullah Wazir, one of the major reasons for the decline in the tax-to-GDP ratio in Pakistan is that the share of the provinces is negligible. Citing the example of India, he said that among the taxes collected at the central level, the share of the provinces in the tax-to-GDP ratio is six per cent and in Pakistan it is barely one per cent.
Talking about the submission of tax returns, Ashfaq Tola said that the returns are very small in terms of our population but the government will have to simplify the system for its submission. Former Pakistani Finance Minister Dr. Hafeez Pasha said that the only reason for the low collection of income tax returns this year seems to be the impact on people's employment due to the corona virus. He said that a large number of people lost their jobs due to the corona virus and many businesses were shut down due to which they submitted less income tax returns. He said that in the current situation, the increase in statements could not be expected.
Why tax collection is not increasing in Pakistan?
Talking about the reasons for non-significant increase in tax collection in Pakistan, Dr. Hafeez Pasha said that it is not possible to increase tax collection unless the economy of the country is fully documented. He also criticized the FBR's tax system, which he said was a major obstacle to increasing tax collection in the country. He said that taxes were being collected in a wrong way in Pakistan.
Hafeez Pasha said that a person has to pay tax for using a mobile card here but the owner of four hundred acres does not pay tax. According to him, the agriculture sector earns more than Rs 900 billion annually but its share in the country's total tax is only Rs 2 billion.
Ashfaq Tola said that in a country where 38% of the gross national product (GDP) does not pay taxes, how can one expect a big and significant increase in tax collection.
When asked if people do not pay taxes because the general impression is that governments are corrupt and tax money is wasted, Ashfaq Tola said that those who say so are themselves corrupt because they are doing their part.
They don't pay taxes but say that the governments here are corrupt. He said that in developed countries of the world people file taxes out of fear of law but in Pakistan on the contrary there is no rule of law so people are not afraid of any punishment for non-payment of taxes. He said that the proportion of direct or indirect taxes in Pakistan is high because people do not pay indirect taxes.
Ashfaq Tola said that if Rs.1000 billion came from income tax, then the amount collected in the form of direct taxes would be enough to benefit the people. He said that the governments themselves do not want to work here. Talking about the Tax Reform Commission in 2016, he said that the commission had worked hard to formulate recommendations but these recommendations have not been implemented yet.
FBR spokesman Nadeem Rizvi was asked about meeting the annual tax target, which he said would be known in June. On the other hand, Rehmatullah Wazir said that distribution of taxes in Pakistan is a big problem. According to him, taxes on agriculture and services are within the purview of the provinces which do not pay much attention to tax collection from these sectors even though they play a significant role in GDP.
Image source Getty Images ,
By the December 8, 2020 deadline this year, 1.7 million income tax returns have been filed
Rehmatullah Wazir said that the provinces get huge amount of money under NFC award so they do not hesitate to collect maximum tax from these sectors within their limits. He said it was true that there was no state writ so people did not pay taxes. "When they see that the state cannot establish its writ to protect human lives, how will it be able to collect taxes through penalties and that is the biggest problem in tax collection in the country at the moment."
"During his tenure, he was asked by big industrialists why he should pay taxes when we pay the security guards for our safety, the roads are broken and there is no infrastructure," he said.
Will the government be able to meet this year's tax collection target?
Pakistan's Prime Minister Imran Khan had claimed to have collected Rs 8,000 billion in taxes in one year before coming to power, but his government has been able to increase tax collection very little in its first two fiscal years.
In the last year of Nawaz League's rule, the tax collected over Rs 3,800 billion reached barely Rs 4,000 billion at the end of last year. The government has set a target of collecting Rs 4,900 billion in taxes this year.
Achieving this goal, tax expert Ashfaq Tola said, does not seem possible in practice. He said that the current economic team is not special enough to achieve this big goal. He said that it was also strange that those who were called 'thieves and corrupt' increased the tax collection from Rs 1900 billion to Rs 3800 billion in their time.
Ashfaq Tola said that giving a good presentation in English would not meet the tax target. Must have complete knowledge.
Rehmatullah Wazir said that so far there has been a four per cent increase in tax collection while the country's tax collection needs to increase by more than 22 per cent to achieve the target. He said he did not think the target set for the current year would be achieved.
When contacted, Dr. Waqar Masood, Special Assistant to the Prime Minister for Revenue, said that he was busy and would discuss the matter in detail when the time came.
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