Irregularities erode tax collector’s capacity

Irregularities and illegal tax adjustments in the Federal Board of Revenue (FBR) has eaten away over Rs18 billion during the current fiscal year. Official figures indicate that irregularities valued at approximately Rs7 billion and Rs11 billion have been detected in the Large Taxpayers Units (LTUs) of Karachi and Lahore, respectively.
An official document outlines that irregularities amounted Rs7.9 billion have been observed in 4,000 cases, owing to incompetence and malpractices of the tax machinery. Data reveals that tax machinery has so far recovered around Rs1.25 billion and process for further recovery is underway.
Highlighting measures to achieve current fiscal revenue collection target, official documents reveal that the FBR has identified some 700,000 potential taxpayers through cross-matching data with third party sources, including National Database and Registration Authority (NADRA) and other government agencies. It reveals that around 1,300 cases have been already assessed and a tax demand of Rs973 million has been created. A senior tax official in the LTU, Lahore underlined that tax machinery in the FBR is constantly monitoring the transactions of these potential taxpayers. It has formulated a criterion that every individual who owns passenger vehicle and immovable property and frequently travel abroad should be enrolled in the tax net.
Figures reveal that FBR has some Rs131 billion in stuck-up arrears, of which Rs83 billion, Rs38 billion and Rs10 billion are pending on account of Income Tax, Sales Tax and Customs Duty, respectively. FBR in its official data has underlined that the Board introduced risk-based audit system in 2010 and 3,577 audits had been completed so far. Figures reveal that FBR has raised a demand of Rs42 billion of which Rs3.2 billion has been recovered so far. Data indicates that FBR has collected taxes of Rs1.150 trillion during July-April 2010-11, which shows a growth of 12 percent (Rs124 billion) as compared to corresponding period of previous year. Figures show that FBR has collected Rs431 billion on account of direct taxes, which represents an increase of 11.1 percent during July-April FY 2010-11.
It is also indicated that tax machinery has collected Rs475 billion under the head of Sales Tax and Rs102 billion on account of Federal Excise Duty, which shows a growth of 14 percent and 7.4 percent, respectively. While on account of Customs Duty, FBR has collected Rs142 billion during the same period, registers an increase of 12.7 percent as compared to the same period of the previous year.
The tax administration has determined a target of Rs160 billion for May and Rs278 billion till June 30 to achieve the revised target of Rs1.588 trillion for FY 2010-11. But senior officials in the board believe that it would be very difficult for the FBR to achieve these targets owing to economic slowdown. Speaking to Pakistan Today, a tax official, on condition of anonymity, underlined that the volume of irregularities in the FBR would rise due to these detections. He said that only few cases had been uncovered so far, there were still thousands of cases which needed to be exposed. He pointed out that the Universal Self Assessment Scheme (USAS) was introduced with a provision of post audit, but it testified to the inefficiency of the federal government and tax administration that no massive audit drive has ever been launched. Responding to a question, he said that tax officials always create tax demand at the end of fiscal year to project higher collection figures. But the tax machinery is never able to translate this demand into revenue, he concluded.