Pakistan to Throw New Punches on Tax Evasion

May 23, 2011 Taxation in Pakistan

Peshawar shop - smileThe government of Pakistan is readying to release its latest budget plan, and is sending strong indication that in the next year it will renew its fight against tax evasion and the underground economy.

With a little more than a week to go before the June 3rd reveal of Pakistan’s latest government budget plan, the Federal Finance Minister Dr Abdul Hafeez Shaikh has given further indication on the government’s intentions to improve tax compliance in the coming fiscal year. At a press event held in Lahore on May 22nd, the Minister said that new efforts would be expended to make an equitable tax system, with more attention paid to stamping out tax evasion.

The Minister said that the Federal Board of Revenue (FBR) has already completed work to identify over 700 000 high-income earners who are not paying any taxes. In an initial step to help combat such behavior, the Board has issued notices to 55 000 of the identified individuals. Throughout the coming fiscal year, the FBR and all relevant tax authorities will conduct in depth investigations of the systematic non-payments.

The FBR would also overhaul the national sales tax regime in order to increase government revenues, and create a self-sufficient stream of funds for national development projects. With the reveal of the upcoming budget, the government intends to remove several exemptions which are currently available in the sales tax system. It is also intended that the sales tax will be expanded to encompass a broader range of services and goods. The move would be beneficial in making headway in stamping out the underground economy.

Abdul Hafeez Shaikh said that it is important to the government not to place extra tax burdens on already compliant taxpayers. Instead, tax authorities will aim to quell non-compliance, and reign in the unofficial sector of the economy of Pakistan. The strengthened pledge to fight tax evasion is expected to yield approximately PKR 120 billion (approx. USD 1.39 billion)more in tax revenues in the next fiscal year.

Photo by yumievriwan