The Federal Board of Revenue has issued notices to more than 200,000 high net worth unregistered persons in a bid to boost tax compliance.
The Revenue Division’s yearbook that was issued on 14 September shows that the Federal Board of Revenue (FBR) had issued notices to high-net-worth individuals using a third-party data bank.
This data bank is part of the FBR’s efforts to broaden the tax base and ensure compliance. It uses sources such as real estate transactions, banks, vehicles, electricity distribution, and gas companies to build a comprehensive overview of the taxpayers’ details.
The FBR had issued 650,000 of these notices on the basis of the data obtained from electricity distribution companies, and 129,541 returns were consequently enforced. This has pushed the total number of income tax return filers for 2020 above 3.1 million.
The FBR has also launched a number of other initiatives to improve tax compliance in Pakistan. These include a tax profiling system called ‘Maloomat’on its web portal to handle the data of 53 million Pakistanis and to give taxpayers access to information about their assets and bank accounts (that is available to the FBR).
It is also developing sales tax harmonization in collaboration with provincial revenue officials. This includes determining a common definition of goods and services, harmonized tax rates, a common minimum threshold, and a single sales tax return and portal.
Within Pakistan’s income tax collection, withholding taxes have stayed on as the biggest component with a 72 percent share in the total income tax collection. In FY 2021, the FBR collected Rs. 1,237.10 billion worth of withholding tax as compared to Rs. 1,091.70 billion in FY 2020, indicating an increase of 13.3 percent.
Within the withholding tax collection, withholding taxes from salaries grew the most at a rate of 17.3 percent year-over-year, followed by the withholding tax on contracts that increase by 14.6 percent year-over-year.
This was followed by the taxes on dividends and telephones that rose by 15.6 percent each, and the taxes on electricity that grew by 12.8 percent.