WAQAS119
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Penalising tax evaders
While the writers have very rightly pointed out the need for the Federal Bureau of Revenue to reach out for the Swiss under the newly enacted Return of Illicit Assets Act (RIAA ), they stop short of suggesting steps for the FBR to look closer to home for untaxed funds or funds which are insufficiently taxed.
While the matter of funds lying in Swiss banks may be a giant leap for FBR given the current brawl between courts and the government, the funds of non-taxpayers lying with local and foreign banks should not go unnoticed.
The FBR levies 10 per cent withholding tax on all profits paid out to savings and term deposit account holders, and quarterly all scheduled banks in Pakistan submit that data to the State Bank of Pakistan with customers CNIC numbers.
Has that data ever been used to quiz non-taxpayers?This refined data available with the SBP can easily be cross-matched with the data of taxpayers who have filed their income tax returns in the current tax year.
After cross-matching the people who have not filed their income tax returns should be fined. But the FBR is only relying on its age-old equable means of collecting tax and deems it fit to rely on only 10 per cent withholding tax.
Let me also introduce the readers to the recently passed legislation by the Congress in the US. The Congress passed and the President of the US signed the Small Business Jobs Act of 2010.
Part of this act deals with the imposition of penalties and a significant increase in penalties for failing to report other incomes and incorrect information on tax returns.
The three tiers of penalties range from a minimum of $30 to a maximum of $1.5 million.
The Internal Revenue Service (IRS) department, the FBRs equivalent in the US, ensures that all American banks, no matter in which geography they operate, are bound to report incomes of US citizens to the IRS if any of its citizens has made any income through deposits in those bank branches.
Later such incomes reported by these banks are tallied with income tax filed by US citizens and any anomaly, intentional or not, is not only heavily fined but also charged withholding tax at the rate of 31 per cent till the time the taxpayers update their income information with the IRS.
The question is, can the FBR take the lead here and start imposing penalties on all such non-taxpayers who do not report their annual incomes and thus leave the tax burden to be shared only by the salaried class.
Maybe it is time to stop wasting money in FBR reforms and to just make the FBR more efficient and robust to ensure that it uses the already available data to its best use.
For the sake of rough estimates, even if we unearth half a million non-taxpayers and impose a meagre penalty of average Rs10,000 (to be deducted directly from their accounts), the FBRs revenue increases instantly by $60 million.
Does the FBR have the will and the good sense to do that?
While the writers have very rightly pointed out the need for the Federal Bureau of Revenue to reach out for the Swiss under the newly enacted Return of Illicit Assets Act (RIAA ), they stop short of suggesting steps for the FBR to look closer to home for untaxed funds or funds which are insufficiently taxed.
While the matter of funds lying in Swiss banks may be a giant leap for FBR given the current brawl between courts and the government, the funds of non-taxpayers lying with local and foreign banks should not go unnoticed.
The FBR levies 10 per cent withholding tax on all profits paid out to savings and term deposit account holders, and quarterly all scheduled banks in Pakistan submit that data to the State Bank of Pakistan with customers CNIC numbers.
Has that data ever been used to quiz non-taxpayers?This refined data available with the SBP can easily be cross-matched with the data of taxpayers who have filed their income tax returns in the current tax year.
After cross-matching the people who have not filed their income tax returns should be fined. But the FBR is only relying on its age-old equable means of collecting tax and deems it fit to rely on only 10 per cent withholding tax.
Let me also introduce the readers to the recently passed legislation by the Congress in the US. The Congress passed and the President of the US signed the Small Business Jobs Act of 2010.
Part of this act deals with the imposition of penalties and a significant increase in penalties for failing to report other incomes and incorrect information on tax returns.
The three tiers of penalties range from a minimum of $30 to a maximum of $1.5 million.
The Internal Revenue Service (IRS) department, the FBRs equivalent in the US, ensures that all American banks, no matter in which geography they operate, are bound to report incomes of US citizens to the IRS if any of its citizens has made any income through deposits in those bank branches.
Later such incomes reported by these banks are tallied with income tax filed by US citizens and any anomaly, intentional or not, is not only heavily fined but also charged withholding tax at the rate of 31 per cent till the time the taxpayers update their income information with the IRS.
The question is, can the FBR take the lead here and start imposing penalties on all such non-taxpayers who do not report their annual incomes and thus leave the tax burden to be shared only by the salaried class.
Maybe it is time to stop wasting money in FBR reforms and to just make the FBR more efficient and robust to ensure that it uses the already available data to its best use.
For the sake of rough estimates, even if we unearth half a million non-taxpayers and impose a meagre penalty of average Rs10,000 (to be deducted directly from their accounts), the FBRs revenue increases instantly by $60 million.
Does the FBR have the will and the good sense to do that?
