Pakistan moves to widen tax net, but big fish yet to be caught
Pakistan has begun chasing wealthy tax-dodgers who enjoy lives of extravagance and luxury, but revenue officials face huge challenges in trying to force the very richest -- and most influential -- to pay up.
Islamabad: Pakistan has begun chasing wealthy tax-dodgers who enjoy lives of extravagance and luxury, but revenue officials face huge challenges in trying to force the very richest -- and most influential -- to pay up.
Pakistan's tax-to-GDP ratio of 9.5 per cent is among the lowest in the world and the government is under pressure from foreign donors and lenders, including the International Monetary Fund (IMF), to increase collection to boost the struggling economy.
Revenue authorities say they have identified about a quarter of a million new taxpayers who they project will add around 14 billion rupees (USD 140 million) to government coffers.
Broadening the tax base and improving the economy after years of drift and sluggish growth under the last government was a key pledge in Prime Minister Nawaz Sharif's 2013 election campaign, when he was swept to power for a third time.
Currently less than one per cent of Pakistanis pay income tax and the government collected just USD 8 billion in total income tax in the 2013-14 fiscal year -- barely enough to cover just the country's defence expenditure of USD 7 billion.
The finance ministry is aiming to boost the tax-to-GDP ratio to 15 per cent in the current fiscal year ending June 30.
As part of those efforts, the Federal Bureau of Revenue (FBR) is compiling lifestyle and vehicle data to try to trace unregistered taxpayers, including wealthy landlords and businessmen zipping between their luxury homes in imported Mercedes.
"We are collecting information from the vehicle registration authority, car manufacturers, utility companies, telecom companies and property registration offices and tracing people who are not paying any tax," FBR spokesman Shahid Hussain told AFP.
The data is used to generate profiles of potential taxpayers, after which demands are issued for them to pay income tax.
"FBR has already issued notices to 261,250 potential tax payers," Hussain told AFP, adding that that new taxpayers have paid 570 million rupees since the crackdown started.
It is not just dodgy businessmen who have been caught -- several lawmakers have been found paying either no tax or very little and not filing their mandatory annual tax statements.
The FBR has taken punitive measures against some "chronic defaulters", freezing nearly 300 bank accounts, seizing more than 100 vehicles, putting 78 properties up for sale and issuing arrest warrants in 40 cases.