ISLAMABAD: A staggering 15 million individuals, including agricultural income earners, are currently not paying any tax, the Federal Board of Revenue chairman disclosed on Wednesday.

“This figure represents a significant portion of the population that remains outside the tax net,” Zubair Tiwana told a meeting of the Senate Standing Committee on Finance.

It was chaired by Senator Saleem Mandviwalla.

In reply to a question, Mr Tiwana said it was not feasible to impose taxes on low-income individuals, who constitute 65pc of the population.

Mr Tiwana was hopeful that the tax deficit could be significantly reduced if 15m potential taxpayers “fulfil their obligations”.

He said the number of taxpayers had reached 4.9m, claiming that 1.2m people were added to the tax net last year.

The FBR chairman said even though 40pc of the national income is derived from agriculture, the sector does not contribute to the tax revenue.

He also pointed out the absence of a significant number of housewives in Pakistan from the tax roll, indicating another potential area for tax expansion.

Mr Tiwana said provinces had failed to generate tax from agriculture incomes.

He further said the World Bank had also called for taxing real estate, agriculture and for lowering of exemption threshold for personal incomes.

He, however, said the FBR had received no formal communication in this regard from the World Bank. Mr Tiwana further said the FBR cannot impose tax on agriculture incomes. “There is no proposal under consideration to lower the exemption threshold on personal income,” the chairman said.

Senators Kamil Ali Agha and Mohsin Aziz asked the FBR to brief the body on the tax collection process from taxpayers, as well as the contributions from both direct and indirect taxes.

Additionally, the committee expressed interest in understanding the impact of smuggling on tax evasion.

Senator Farooq H. Naek criticised the government’s policy of providing subsidy on electricity bills to the affluent. He argued that such practices foster inequality, insisting that there should be no discrimination between the rich and the poor.

Fake currency

The Senate committee was abuzz with discussions on counterfeit currency notes. Salim Mandviwalla, the committee’s chairman, said most currency notes of Rs 1,000 denomination were fake. “What is more alarming, even ATMs are dispensing counterfeit notes.”

He offered to show “counterfeit notes” of Rs1,000 and Rs5,000 denominations. Senator Mohsin Aziz suggested the discontinuation of Rs5,000 notes.

Jameel Ahmed, the State Bank of Pakistan (SBP) Governor, assured the committee that changes to security features of currency notes were under way to combat this issue. He also disclosed the SBP planned to introduce polymer currency in future.

In a bid to discourage counterfeit currency, the committee suggested transitioning to plastic currency“.

Fraud in bank accounts

The committee addressed the issue of unauthorised withdrawals from private bank accounts, with focus on a reported Rs5 billion fraud involving multiple accounts.

The SBP governor clarified that the actual amount involved was around Rs254 million and that action had been initiated against the bank manager concerned. Representatives of the affected families, who were present at the meeting, claimed that the amount was closer to Rs350m.

In a positive development, Rs270 million was restored to the victims’ accounts within six weeks.

Published in Dawn, October 26th, 2023