ISLAMABAD: After a large exercise of serving 3,121 tax notices on high net worth individuals who are non-filers of tax returns, the Federal Board of Revenue (FBR) has received a weak response as only 220 of them have complied with the terms of the notice thus far.

Soon after the Pakistan Tehreek-i-Insaf came to power, the FBR identified 3,100 high net-worth individuals who were non-filers of tax returns and issued notices to them in four batches. In the first batch, FBR issued notices to 148 rich people who were non-filers, followed by another 75 notices, 220 notices, respectively.

In the last batch 2, 678 people were served with notices asking them to file returns.

Tax officials believe the rest of the notices are “under processing” and remain confident that those served will file their returns eventually. However, the tax official did not reveal the quantum of revenue collected from those who have complied by filing their returns thus far.

Only 220 file returns after notices served on 3,121

The FBR has also identified 30,000 non-filers of tax returns, though notices have not yet gone out to them. These high-net worth individuals who are non-filers can be identified in the system and are seen purchasing immovable property worth Rs20m and above, as well as vehicles of 1800cc engine size and above, or earning rental income of Rs10m and above.

On top of this, the tax authorities have sought and received information on 152,518 Pakistani nationals with undeclared assets abroad. The information has been received from 28 countries under the OECD tax convention.

According to the tax official, notices are being served to initiate process for recovery of evaded taxes, if any, and also determine whether the assets in question have been acquired from legally generated incomes. The data received was matched with domestic data and identified the tax evaders, the official said.

On bilateral level, according to the data, Pakistan has also obtained information about 4,023 properties held by Pakistanis in United Arab Emirates.

The mapping of the data shows that of the total identified properties only 987 properties were of Pakistani residents. Of these, FBR has issued 648 notices to owners of these properties. The total tax amount raised in these notices is Rs631 million thus far.

In its manifesto, the PTI promised deep reforms in the FBR to make it into an autonomous body eventually. The government’s own Economic Advisory Council has advised pursuing non-compliant individuals as a way to broaden the tax net and promote documentation of the economy. Council members say comparative data from other countries shows large room for growth in direct taxes, and with the detailed data available in databases like those of Nadra, the banking system and the FBR, along with utility bills, foreign and domestic travel and school registration, it is easy to pinpoint people who have ample resources at their disposal but are not filing tax returns.

According to the tax official, 128 cases are under process. However, it is also not yet clear whether owners of these properties can be taxed or not.

Published in Dawn, December 28th, 2018