Investigations Needed over Pakistan Tax Error

July 25, 2011 Taxation in USA

Pakistan Tax Revenues Overstated by Billions of RupeesA high level inquiry will soon be launched in Pakistan to investigate why the Federal Board of Revenue grossly misreported its tax revenue collections figures.

As was revealed in the national media of Pakistan, on Saturday official sources indicated that internal errors were to blame behind an announcement by the FBR Chairman Salman Siddiqui, in which incorrect levels of tax revenue collections were reported. In a press conference held on June 30th the Chairman reported that annual tax revenues had reached PKR 1.59 trillion. However, earlier last week it was revealed that that the actual collections figure was only PKR 1.55 trillion.

The misreporting of revenue is having significant effect on the country, as the government now is forced to reevaluate its tax collections targets and annual budget plan for the new fiscal year, which were revealed on July 22nd. The originally announced collections results were PKR 2 billion above the collections target for the year, and exceed performance benchmarks placed on Pakistan by the International Monetary Fund (IMF). Analysts now fear that the IMF could deem Pakistan as incapable of meeting its budget deficit reduction targets and could withhold a portion of the country’s bailout funds, meaning that the government might be forced to remove current subsidies on everyday items and fuel.

According to Salman Siddiqui, the error in the overall tax revenue calculation can be attributed to misreporting of collections by the national Large Taxpayer Unit (LTU) and Regional Tax Offices (RTOs). The Chairman said that the original tax revenue report he received overstated collections by PRK 38 billion, due to an error in which tax refunds were not accounted for. Investigations will now be conducted to ascertain why the incorrect tax revenue figure was allowed to be reported. An additional inquiry will be held to discover why the mistake was not revealed until an anonymous source from the FBR reported the real collections levels. The government will also look into the performance of the FBR and its departments, to find what improvements need to be made to fix the under performing tax system.

Photo by amir taj