LAHORE: Federal Board of Revenue Chairman Rashid Mahmood Langrial has criticised the country’s elite for not paying tax commensurate with their income.

“Roughly 67 million of the total 240m population are either employed or job seeking. Of them (67m), top five per cent are either non-payers or paying tax not in accordance with their income. Interestingly most of the top one per cent of the total 67m - which are 670,000 in total - are also not paying tax accurately and are involved in under-filing,” Mr Langrial explained while speaking to the office-bearers and members of the Lahore Chamber of Commerce & Industry (LCCI) here on Tuesday.

“Of 670,000, only 200,000 are paying taxes within their brackets while the rest 470,000 are not paying income tax as per their actual income,” he said.

“Who are these people (5pc)? You, we and everyone know them well. They use to speak at TV channels (talk shows), giving or proposing various solutions to change the country, increase tax ratio etc,” he deplored and held them responsible for causing a gap of Rs1.2 trillion in tax-to-GDP ratio.

LCCI head says businessmen shy of formalising operations due to frequent audits, FBR’s access to bank accounts

Mr Langrial said despite knowing such a situation, “we are not ready to pay tax. You say that this year’s target of Rs12,970 billion (12.970 trillion) is unrealistic. Yes, it is really very difficult. And it is difficult because we are incompetent. We evade tax,” he continued, admitting some issues on the part of FBR officers too.

He, however, claimed that the government has taken up restructuring of the FBR very seriously. According to him, most FBR officers posted in regional offices and Islamabad are honest, as their service record and background was checked thoroughly before posting them.

Rashid Langrial said Pakistan’s current tax-to-GDP ratio stood at 10.3pc, which is significantly below the required level of 18pc at least. He revealed that the sales tax-to-GDP ratio is just 3pc, whereas it should at least be 5pc. He disclosed that there exists a gap of Rs3.1tr in sales tax collection and Rs2tr in income tax collection.

The FBR chairman said if only the top 1pc of the total 67m people pay taxes in line with their income, the potential revenue from these individuals could be Rs1.7tr. “To stabilise the economy, Pakistan’s tax-to-GDP ratio must be increased to 14pc for which we have introduced a ‘transformation plan’ to enhance efficiency.

“With government support, the FBR is undergoing reforms and restructuring and soon it will emerge as a significantly improved institution,” he added.

He also shed light on the positive developments, such as an increase in [formal] imports in November and the reorganisation of the Customs Enforcement Wing. He said in the past, around Rs35bn worth of tax refunds were issued annually for fast-track cases but in the current month alone, refunds to the tune of Rs70bn have been disbursed.

He also admitted issues on the part of FBR and said: “Yes, there are issues on our part. But the issues also exist on other side.”

Earlier, speaking on the occasion, LCCI President Mian Abuzar Shad said the business community is willing to pay taxes but overly complex system is a major obstacle to expanding the tax net. He expressed concerns over issues like frequent audits, the FBR’s access to bank accounts and surcharges, which discourage businesses from formalising their operations. Shad presented data highlighting the FBR’s collection in the fiscal year 2023-24, which stood at Rs9,311bn. He said that direct taxes were Rs4,530bn, customs duty Rs1,104bn, sales tax Rs3,098bn and federal excise duty Rs577bn.

The LCCI president suggested simplifying the tax regime and promoting awareness about the benefits of entering the tax net. He urged the government to ensure policy consistency to foster confidence among businesses and improve economic conditions.

Published in Dawn, December 18th, 2024