THE recently released Federal Board of Revenue’s Yearbook 2011-12 shows that net collection stood at Rs1,883 billion with a 20.9 per cent growth over the last year’s figure of Rs1,558 billion. This has been made possible despite a 37.3 per cent increase in refunds/rebates over collection of the previous year.

It has also been highlighted that the tax-to-GDP ratio has improved to 9.1 per cent in 2011-12 from the lowest level of 8.6 per cent recorded for 2010-11. It has been claimed that this success story has been possible despite unfavorable circumstances although the assigned target of Rs1952 billion was missed by 3.5 per cent.

There was a positive growth of 22.6 per cent in direct taxes, 27.1 per cent in sales tax and 17.3 per cent in customs duty compared to the previous year. Only federal excise duty has recorded a negative growth of 10.8 per cent compared to 2010-11.

As far as refunds/ rebates are concerned, the year 2011-12 has shown an increase of 96.2 per cent over last year i.e. Rs91.6 billion in 2011-12 compared to Rs46.7 billion in 2010-11.

If the refunds in the year under review had been curtailed to the figures of last year and the Rs25 billion of sales tax on services collected by Sindh Revenue Board are taken into account, then the target of Rs1952 billion has been achieved.

However, the core issue is how this achievement has come about. The direct tax collection reveals that withholding taxes and voluntary payments amounted to 51 per cent and 29 per cent respectively of the gross revenue. The tax department is not directly involved because it comprises of indirect collection from different sources i.e. imports, salary, utility bills, bank interest, dividends, cash withdrawal, contracts, advance payments and payments with return.

The department only monitors but is not in any way instrumental in its collection. The only collection that is directly created and collected by the department through its officers is ‘Collection on Demand’. This amounts to 16 per cent of the gross collection whereas the balance 84 per cent is being collected by everyone except the officers of the department.

Raising revenues each year by enlarging the scope of withholding taxes is no big game as this does not come within the ambit of direct taxes. This suits the moneyed class as it does not hit their pockets directly because they transfer their tax liability to everyone except themselves. This practice directly hits the common man as they then pay for all they consume.

The government is not serious in expanding the tax base. This is evident from the yearbook which does not contain any information regarding the number of returns of income filed in comparison to the number of returns due on the basis of National Tax Numbers issued. It also does not talk of the action taken against the defaulters and the quantum of penalties imposed in this context.

Had these figures been provided, the success story depicted in the yearbook would have come down like a house of cards. It is, however, common knowledge that 1.4 million returns had been filed and if the statements and the salary returns of 0.96 million are excluded, the figure of business returns is reduced to less than half a million. The returns showing income declared above Rs1million is not even two hundred thousand.

Officers of the department are getting double salaries for the last many years; they, perhaps, think that their 16 per cent of the total tax collection is no mean achievement. The best compliment to the Federal Board of Revenue comes in the shape of amnesty schemes at least once every five years. These schemes have been coming in various shapes since 1976. In 2000-01 Rs10 billion and in 2008 2.5 billion were collected. However, this time it is an ambitious target of Rs176 billion.

The department thinks that this would be possible by netting around four million tax evaders on the basis of details available with the Nadra. If these tax evaders are citizens of Pakistan and if substantial information is available, what is stopping the department to go after them in the first place and why a tax amnesty scheme is required. With more and more people availing the benefits of these amnesty schemes, has anyone tried to figure out what they have been contributing subsequently?

Basically, tax collection and tax base expansion depends upon the will of the government to do so. Since 2000, the tax collection has increased many times while number of the taxpayers has not increased. In 2000-01 the returns of income filed were around 1.4 million and this figure is still there in 2012 which means that either the same 1.4 million tax payers have paid their taxes manifold in the last 12 years or that tax has been collected more in the nature of an indirect tax.

In such a situation, introducing another amnesty scheme will further infuriate the honest tax payer. Such schemes can only work when the government intends to go after the defaulters in the first place. When the last scheme was launched in 2008 it was advertised that after the deadline, the government will go for a crackdown as enough information was available with the department. But what happened afterwards is in everyone’s knowledge.

The declaration and the collection were both disappointing but nothing happened later on. Had we gone after the big tax evaders at that time there would have been no need to launch another amnesty scheme at this stage. What is actually required is that we first go after the so-called four million tax evaders whose information is available with the department. Notices should be issued immediately and tax liability of a person should be determined on the basis of the information available. If the defaulter pays the tax evaded then penal action should be waived off on a one time basis. This should be the amnesty to the tax evader. By asking these defaulters to first declare and whiten their assets will not bear any fruit. Moreover, in the bargain we are allowing the defaulters to whiten one thousand billion rupees worth of assets.

We have waited 65 years to have 1.4 million taxpayers, then why are we so ambitious to net another four million taxpayers in just two and a half months. This is not physically possible and will never be achieved given the efficiency of the revenue department.

When every person who has a car or a property in his name is required to file a return, how are we justified in saying that Pakistan does not have more than 1.4 million of such people. Every year more than one hundred thousand new cars are churned out by the local manufacturers priced between Rs500,000/- to Rs2,500,000/- and an equal number of cars are imported. Every day hundreds of properties change hands and expensive eating places are full of people who pay their bills through credit cards. But still the government needs to launch an amnesty scheme to bring them into the tax net. This is only making the rich, richer and the poor, poorer.

If the government is really serious, then it should take concrete steps like: (1)    tax farm income like any other income, (2) re-introduce wealth tax (3) tax rental income as per normal rates, not reduced rates, as the rental income is only earned by the rich (4) exemptions to certain classes of income should be withdrawn (5) wealth statements should be examined thoroughly on regular basis to unearth un-declared assets(6) People should not be allowed to register expensive cars and build houses unless they are on tax net and filing tax returns. (8) the expenditure statement should be complied with and tallied with the information available with the tax department.(9) The minimum sale price should be fixed as per market prices.