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  • According to 2017 census, our population is 207.77 million [provisional]. The dependent population of children under the age of 15 years is 35.4% and 4.2% people are above 65 years. Out of total population, 40 million are below poverty line earning less than two dollars a day. Our labour force, among the tenth largest in the world, is around 70 million. Majority of rural labour force [42.3%] earns below taxable income or agricultural income falling outside the ambit of Income Tax Ordinance, 2001. Analysing all these figures (juxtaposed), individuals liable to income tax cannot be more than 10 million. FBR collected 12% advance, adjustable income tax from 95 million mobile users alone (total subscribers were 150 million as on June 30, 2018) during the fiscal year 2017-18. Out of these only 1,483,020 (1.56%) filed tax return for tax year 2018 till the last date (December 17, 2018) after availing many given months of relaxation.

The following measures/steps are necessary to enforce tax obligations and ensure that the rights of citizens are safeguarded:

  • All individuals having taxable income should be required to file simple and easy tax return form which should be available both in English and Urdu—incentive for filing return should be Rs. 2,000 cash payback in the bank account of the filer. It will help creating data base at national level about households and their earning levels.
  • Tax rate for individuals should be 10% subject to minimum alternate tax of 2.5% of net wealth, if net value of assets exceeds Rs. 10 million on the last day of tax year.
  • All non-filers should be given a chance to whiten all untaxed assets/incomes for any past year, at home or abroad, by paying 10% tax latest by June 30, 2020. After the deadline, stringent action under the law should be taken including confiscation and imprisonment. For this, asset seizure legislation should be passed. 
  • One-time de-log litigation scheme for taxpayers to pay 10% of tax arrears between January 1, 2019 to June 30, 2020. This will clear backlog of pending cases in various courts and recover stuck up revenue of billions of rupees. 
  • Government may offer all persons to pay income tax/sales tax for tax year 2018 to 2020 under a self-assessment scheme, every year paying more than 25% tax over the last year, with no audit or inquiry. It would bring much-needed revenues to overcome fiscal deficit. In three years’ time, while the businessmen concentrate on business growth, the Government should prepare their tax profiles by data integration. After three years, both would be in a position to determine income tax/sales tax payment on actual basis.
  • Simplified, low rate (8%) sales tax with no exemptions.
  • Simplify Customs tariff with ‘One-Chapter One-rate’. Rate of 10% with certain exceptions to protect local industries and exporters. TVs, air conditioners, cars and other luxury items (to be identified consulting the stakeholders), tobacco, liquor should be taxed at a higher rate.
  • Radiographic scanning of all inbound and outbound containers to plug revenue leakages. Stringent measures to counter under-invoicing etc.
  • No functional mechanism has so far been evolved to effectively check any unfair practices on the part of tax administrators. They are not made liable to punitive actions and/or pecuniary damages even after the final fact-finding authority adjudges their actions arbitrary, excessive and beyond their assigned powers. The Federal Tax Ombudsman should be given the statutory power of awarding damages in such instances.
  • Taxpayers must be given adequate rights before the State justifies strict actions for enforcing tax obligations. For restoring confidence of taxpayers the State should promulgate Taxpayers’ Bill of Rights that must safeguard and strengthen the rights of taxpayers, ensure equality of treatment, guarantee privacy and confidentiality of their declarations, provide right to assistance by State in tax matters, guarantee unfettered right of appeal through an independent tax appellate system and provide facilities for independent review of disputes with tax authorities.
  • There is massive sales tax evasion—even registered persons are not depositing full amount of sales tax. A scheme should be announced entitling a payer of sales tax to get refund of 20% of the amount paid. He/she should send invoices to FBR, which can authorise and remit refund after verification of genuineness of the invoice (by checking sellers’ registration number). In this way, FBR can develop data base about sales of all persons and then cross verify the same with the receipts declared by them in their sales/income tax returns.  

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