ISLAMABAD: Of the total 2.743 million individual taxpayers, around 1.004m or 36.6 per cent taxpayers paid no income tax in the tax year 2018, the Federal Board of Revenue (FBR) data showed.

Even though all of these individuals filed their income tax returns, they fall under the non-tax bracket where their declared annual incomes are less than Rs400,000. In the case of association of persons (AOPs) 29,480 or 45.82pc are return filers, but paid zero income tax as their declared incomes fell below the taxable limit.

Moreover, an interesting is the fact that this particular tax bracket has gained many new entrants over the past years to skip higher tax rates applicable on non-filers. The government introduced the tool to encourage documentation of the economy, but it has encouraged nil or junk filers. In the first three taxable brackets, around 1.296m or 47pc taxpayers file their income tax returns.

It shows that bulk of return filers of around 2.3m or 84pc are either junk filers or fall in the lowest tax brackets.

As many as 433,144 return filers in the taxable slab of Rs400,001 to Rs500,000 whereas 441,312 fall in the Rs500,001 to Rs750,000. A nominal sum of Rs1,000 for individuals in the income brackets ranging from Rs400,001 to Rs800,000 has been introduced through the Finance Act 2018.

Nearly 422,349 return filers stood in the range of Rs750, 001 to Rs1.5m bracket and government collects Rs2,000 from individuals falling in the bracket of Rs800,001 to Rs1.2m. It clearly shows that the bulk of return filers pay a very nominal income tax.

In Pakistan, 235,514 individuals filed their tax returns under the bracket of Rs1.5m to Rs6m. Ironically, there are only 22,593 individuals who declared their annual income over Rs6m.

The trend is worrisome in the corporate sector as nearly 32,000 companies or 71pc of big taxpayers declared their annual income below Rs500,000.

The next bulk of 4,809 companies are in the fixed tax regime whereas around 4,859 companies declared their income in the range of Rs500,001 to Rs7m.

There are only 3,380 or 7.58pc big companies across the country, which declared their annual income in excess of Rs7m. The total number of who companies filed tax returns in 2018 were 44,609 as against the registered companies of over 100,000 with the Securities and Exchange Companies of Pakistan.

Pakistan is known for its low compliance to income tax rules and international donors want the country to widen its tax base before asking the rest of the world for more aid and help. The contribution of companies in income tax collection is 56pc followed by 21pc non-salaried individuals, 15pc salary individuals and 8pc AoPs.

The province-wise data showed that bulk of return filers belong to Punjab at 1.696m, followed by 779,771 in Sindh, 171,303 in Khyber Pakhtunkhwa, 151,204 in Islamabad Capital Territory, 52,101 in Balochistan and 1,437 in Gilgit Baltistan.

Major markets

In Karachi, as many as 106,818 businessmen filed their tax returns in 94 markets. The total tax paid in these markets stood at Rs97.362 billion. The bulk of the tax amount is contributed by 72,339 shop owners in Saddar, Karachi at Rs77.177bn.

The second highest tax contribution of Rs6.191bn came from Market Estate Avenue from 774 return filers followed by 202 filers from Forum, Karachi paying Rs3.314bn. In Jodia Bazar, around 2,384 shop owners filed their tax returns to the tune of Rs3.059bn.

In Lahore, 115,964 shop owners in 57 markets filed their tax returns in tax year 2018 and paid Rs41.262bn. The major contribution came from 17,800 tax filers based out of the Multan Road market paying Rs10.912bn followed by Raiwand bazaar — return filers of 6,096 — at Rs4.175bn.

In Islamabad, in 10 major markets around 8,150 businessmen filed their tax returns and paid an amount of Rs40.318bn in the tax year 2018. The bulk of tax around Rs39.935bn was collected from 5,854 filers in the Blue Area.

City-wise collection show that Karachi contributed Rs397.374bn in income tax (excluding district Malir) in the tax year 2018 followed by Islamabad with a tax payment of Rs204.148bn, Lahore Rs200.716bn, Peshawar Rs13.643bn and Quetta Rs10.132bn, respectively.

Published in Dawn, September 20th, 2020