The government’s efforts to broaden the tax base has failed to yield results as it only managed to integrate 1900 new sales machines within the tax system in a span of three months. Rs 1 million in income tax returns have been received, with just five days left in the deadline, in comparison to Rs 3.1 million received in the previous year.
The government has been unsuccessful in launching a lottery scheme for taxpayers which had the deadline of August 15. Apart from missing deadlines for the lottery scheme, the state also failed to issue licenses for IT companies to support and facilitate business integration via the point of sales (POS) initiative. The state’s failure to create an enabling environment has cost an arm and a leg.
As per the reports, the Federal Board of Revenue (FBR), in comparison to last year’s income tax returns, which amounted to around Rs 3.1 million, has only managed to collect around Rs 1 million in returns. Chairman FBR Dr. Mohammad Ashfaq Ahmad, though is still determined not to give any extension to the deadline of September 30th.
FBR, this year made sure the return forms were uploaded on time to avoid having to provide an extension due to late uploading of the forms like it did last year. The body had to provide an extension till December 8 in order to give 90 mandatory days to taxpayers due to the aforementioned negligence. The requirement as per law to give three months to tax payers for the purpose of filing returns has been met this time around, it was reported.
The government took a number of measures in order to encourage and compel people to file returns but all in vain. It appears that the carrot and stick policy has also failed to yield results.
The government had previously claimed that it had successfully identified 7.2 million of the populace based on their withholding tax payments, however, it barely managed to bring 350,000 of those identified in the tax net.
Similarly, the business integration campaign also failed to produce good results according to the sources.
According to the data, the number of points of sales that were integrated with the FBR was 11,830 in June of the preceding year. The number rose to over 13,700, which meant that nearly 1900 additional machines could have been integrated within the first three months of this year. However, the number of newly integrated retailers in those three months was only 642, making the number of total integrated retailers 1470.
Furthermore, the board has been unsuccessful in providing an environment that fosters the integration of businesses into the tax system even though it has been the government’s top priority after the Kamyab Pakistan Program as stated by Finance Minister Shaukat Tarin. Two of the minister’s former associates were also on board in assisting the FBR with the business integration campaign but to no avail.
Earlier in June, FBR had emphasized that the goal of configuring 500,000 points of sales at retail shops with a tax database in addition to collecting revenue worth Rs100 billion, set by the Finance minister is unrealistic. The initiative of the integration of 500,000 POS with FBR in order to broaden the tax base is also viewed as the single largest initiative announced as part of the budget speech by Tarin.
The reports suggest that the FBR can collect around Rs 15 billion more during the remaining fiscal year in contrast to the budgeted figure of Rs 50 billion and Tarin’s wish to raise Rs 100 billion.
The results from the nearly three months are in line with FBR’s judgment.
Licenses to IT firms had to be issued by the state for the configuration of the POS.
The first almost three months’ results prove that the FBR assessment was correct.
The government was required to issue licenses to information technology firms for the configuration of POS. However, the deadline of the end of August was missed by FBR resulting in putting a hold on the process.
A lottery scheme providing up to Rs1.5 M per head on a monthly basis to customers who purchase goods from POS integrated retailers and shared their receipts with the board was to be launched by the Finance Minister. However, the government failed to launch the scheme within three months even after it charged the customers Rs 1 per sale invoice.
According to sources, Tarin also planned on integrating around 65,000 debit and credit card machines provided to the retailers via the banks. This initiative also failed as a number of Karachi-based businessmen decided to return the machines rather than register with FBR.
The government plan requires online marketplaces to be integrated within the POS system of the FBR. Furthermore, it requires retailers who have acquired a POS for the payments received via debit or credit cards from banks or other digital payment services provided by the State Bank of Pakistan (SBP) to also integrate into the system.
Prime Minister Imran Khan appointed Tarin for the office of Finance Minister earlier in April to serve for six months till October 15. The PM would need to get him elected as a senator in order to continue serving as the minister of finance. As the announcement of a plan by the PM, to get Tarin elected for the position of a senator got delayed, Tarin’s fate has also become uncertain.