Tax Directory 2016—Analysis

The top 500 companies in Pakistan paid Rs 364.325 billion in taxes during 2016-17. Out of 79,728 companies included in the Tax Directory 2016-17, about 32,943 of them paid no tax and 22,312 paid less than Rs 1 million in tax. These statistics were revealed as part of the analysis of the Tax Payers Directory in ‘Between the Lines’, released by the Sustainable Development Policy Institute (SDPI).

The comprehensive analysis of the tax directory 2016-17 was done by Shoaib Nizami, while co-authors Mohsin Kazmi and Arsalan Channa, revealed the data at the launch of tax payers directory ‘Between the Lines’.

Data analysis showed that the leading 500 companies paid Rs 364.325 billion tax during 2016-17, reflecting an increase of 30 percent when compared with the previous fiscal year. The analysis strongly recommended joint efforts of the Securities and Exchange Commission of Pakistan (SECP) and FBR to increase number of tax returns, particularly in corporate sector.

This document is part of a series of publications published earlier, providing insight into the tax revenues collected by Federal Board of Revenue (FBR). In continuation, this report analyzes the trends and changes that occurred during the fiscal year 2016-17 as recorded in the directory maintained by FBR. The report provides changing trends in tax payments within sectors and across sectors. For enhanced understanding, diagrammatic representation of statistics has also been done.

Shoaib Nizami presented the details of the tax payers by his presentation. He highlighted that the study had scrutinized 79,728 companies and associations registered in the Federal Board with both FBR and SECP.

It emerged that as a gross total, Rs 484 billion in tax were collected according to tax returns filed in June 2015 to July 2016. Findings suggested that about 66 companies and associations paid tax of over one billion rupees, contributing a total of Rs 231 billion.

In comparison to the previous record of the highest paying entities, the number of 66 companies is higher than the 46 recorded in fiscal year 2013-14 which totaled Rs 192 billion. During this period Rs 735 billion were collected as direct tax, Rs 344.688 billion were collected as total income tax, as the total registered entities with SECP remained at 61, 989, with total registered entities with FBR at 64, 545. The companies that paid taxes during FY13-14 were 37,939.

The author of the tax directory said that the analysis of the filed tax returns has shown a very interesting trend. The banking sector grew rapidly while the energy sector’s contribution lessened and construction sector showed average performance. Public energy giants such as OGDCL and others paid just Rs 5 billion tax in fiscal year 2016-17 compared to previous payment of Rs 36 billion in fiscal year 2013-14.

In just 4 years, this steep decline in tax paid is paramount not only in numbers but is also of a grave concern. Also, PPL, Attock Petroleum, Shell, Ceyron and Mari Petroleum’s tax amounts also shrank.

Shoaib Nizami said that as a way forward, the indicators were underpinning the need for SECP and FBR to join hands to increase tax returns. Besides One Stop Shop of SECP and FBR, EOBI needs to further strengthen the system and SECP’s form 23 and 29 information should be shared with FBR with companies’ directors and bank accounts. Online return submission should be made easy and user friendly, trust deficit of FBR needs to be removed and withholding tax collection should be reduced, he concluded.

The rise in collection of revenue as direct taxes was a positive sign for national economy as trend suggested in the year 2016-17. However, the flip side of this fact did not seem that promising as volume of indirect taxes has shown an increase with similar ratio.

The study scrutinized 79,728 companies and associations registered in the Federal Board of Revenue and Securities and Exchange Commission of Pakistan. As gross total, Rs 484 billion in tax were collected according to tax returns filed in June 2015 to July 2016.

In order to see which entities have paid the highest tax, the lowest and in-between, this study categorized about 79,728 entities into six quantified categories:

• companies and associations having paid tax of Rs1 billion
• companies and associations having paid tax of more than Rs1 billion
• those who paid Rs100 million or more
• those who paid Rs1 million
• those who paid less than Rs1 million
• and lastly those who did not pay tax at all.

In summary, the report’s broad findings show that 66 companies and associations paid tax of over one billion rupees contributing a total of Rs231 billion. In comparison to previous record of the highest paying entities, this number of 66 is higher than 46 recorded in FY 2013-14 which totaled at Rs192 billion.

About companies in agriculture, food security and sugar, Nizami said that:

• a total of 1980 companies filed tax returns,
• 5 companies/associations paid tax of over one billion rupees,
• 28 companies/associations paid tax of over Rs100 million,
• 107 companies/associations paid tax of over Rs 10 million,
• 505 companies/associations paid tax of over Rs1 million,
• 606 companies/associations paid tax of less than Rs1 million
• and 707 companies/associations paid no tax at all.

In the banking & modaraba sector,

• a total of 240 companies filed tax returns,
• 16 companies/associations paid tax of over Rs1 billion,
• 13 companies/associations paid tax of over Rs 100 million,
• 15 companies/associations paid tax of over Rs10 million,
• 16 companies/associations paid tax of over Rs1 million,
• 35 companies/associations paid tax of less than Rs1 million
• and 145 companies/associations paid no tax at all.

About the oil & gas energy sector the author said that:

• a total of 2686 companies filed tax returns,
• 11 companies/associations paid tax of over Rs1 billion,
• 32 companies/associations paid tax of over Rs100 million,
• 94 companies/associations paid tax of over Rs10 million,
• 539 companies/associations paid tax of over Rs1 million,
• 944 companies/associations paid tax of less than Rs1 million
• 1066 companies/associations paid no tax at all.

In the textile sector. the author reveals that

• a total of 2050 companies filed tax returns,
• zero number of companies/associations paid tax of over Rs1 billion,
• 16 companies/associations paid tax of over Rs100 million,
• 141 companies/associations paid tax of over Rs10 million,
• 481 companies/associations paid tax of over Rs1 million,
• 945 companies/associations paid tax of less than Rs1 million
• and 467 companies/associations paid no tax at all.

Dr Abid Qaiyum Suleri, Executive Director SDPI, said that instead of adding on burden to existing tax payers as the report suggested, Federal Board of Revenue (FBR) should focus on broadening tax base. Similarly, the anomaly of data that existed between the FBR and SECP needed to be fixed, he added.