Mohsin Siddiqui (Chief Reporter)
The Federal Board of Revenue (FBR) has recently fulfilled the demands of the World Bank (WB) for the identification of millions of new taxpayers through automated data sharing and ICT-based business intelligence under the $400 million Pakistan Raises Revenue Project (PRRP).
According to top officials, the project focuses on numbers of new taxpayers, including individuals and firms with income above the taxable threshold who receive notices to register, are added to the tax register, and pay taxes during the fiscal year. The annual targets are not cumulative.
The Independent Verification Agents (IVA) will confirm the number of new taxpayers who receive FBR notices, register, file, and pay taxes each year, with nil filers also being considered. However, the FBR is facing a persistent dilemma with the concept of filer and non-filer as millions of filers come into the tax net to reduce the tax burden at the time of making any taxable transactions but then prefer to exit or file nil returns in subsequent years.
Under the WB’s condition of the project loan, the FBR has adopted a regulation on risk-based selection of audit cases and limited the selection to only 10 percent subject to clearance by the Member audit. The FBR has restructured its Audit Wing to include a Compliance Unit and Audit Unit, with 85 percent comprehensive field audits of Large Taxpayers and 15 issue-oriented audits for five years selected by the risk-based selection tool and monitored by the Compliance Unit through AMIS with associated reports submitted to FBR management.
The World Bank will verify the adoption of regulation-based selection of audit cases and limiting audit cases selected outside the risk-based tool to up to 10 percent of total cases in a fiscal year.
As the WB’s project period is extended up to June 2025, it remains to be seen how many potential taxpayers will be added into the highly skewed and narrowed tax base, with only 4 to 5 million people filing their returns and 1 to 2 million filing just nil returns. These nil filers are only cheating the tax system for the purpose of becoming active taxpayers.
