Accountability

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Promises from PTI Manifesto and Imran Khan’s first address to the nation

1.Ensuring full autonomy of National Accountability Bureau (NAB) and other accountability institutions like Federal Bureau of Revenue (FBR).

2. NAB will be facilitated through funds and manpower.

3.Crack down on corrupt practices that promote tax evasion.

4.Addressing legal gaps in the accountability laws including reviewing “voluntary return” and “plea bargain” provisions.

5.Strengthening other accountability institutions including the Auditor General’s Office and Federal Investigation Agency (FIA) as well as parliamentary bodies especially the Public Accounts Committee.

6.Crack down land & bhatta mafias.

Tahir Dhindsa, Senior Analyst and Journalist, talks about the whistle blower act.

7.Whistle blower act will be passed. People who will help in pointing out the corrupt practices in government department will be given 20-25% of the money recovered

Current situation

The highly narrow tax base where the number of filers stood at just 1.4 million out of total 206 million population highlights that less than one percent of the country’s population are return filers. The FBR is facing a massive tax shortfall during the current fiscal in the range of Rs 150 to 170 billion and without broadening the tax base the country’s fiscal woes cannot overcome.

Progress

Publish names of non-compliant defaulters and strongly pursue large tax evaders.

26 September 2018

Federal Board of Revenue (FBR) finalized its plan to identify top 100 tax evaders. It is carried out in two phases. In the first phase, notices are issued to 1,000 people who have purchased properties in Dubai and United Kingdom (UK). In the second phase, the FBR has directed the relevant authorities to identify top tax evaders immediately. The FBR has also identified several thousand people who have purchased properties in Pakistan but did not exist on the tax rolls.

3 October 2018

In its massive drive for the recovery of taxes from influential tax evaders, FBR identified all tax evaders and subjected them to heavy fines and penalties. The FBR has also decided to start action against all those tax evaders who have purchased properties worth over Rs20 million or 1800 CC engine cars in a year but have not filed their tax returns and are not in the list of taxpayers. FBR had also submitted a plan to launch a crackdown at eight areas where the richest segments of society reside.

Dr Ashfaque Hassan Khan, member of the Economic Advisory Council of the Government of Pakistan, talks about the prolonged process of accountability in the country.

24 October 2018

A peon of Sindh Health Ministry was listed as the owner of a multi-million firm, but the real owner is found to be the worker of Health Ministry, Muhammad Zahid Nawaz, as uncovered by FBR. He has been sent an income tax bill of Rs160 million and FBR froze his current bank account.

8 November 2018

The federal cabinet was informed that FBR has started currency declaration system at 24 major entry and exit points to stop currency smuggling on 8 November. The passengers previously used multiple exit points to bypass the limit which is $10,000 in cash. But now all these points have been connected electronically to detect such individuals evading the prescribing limit.

14 November 2018

Auditor General of Pakistan (AGP)’s report has revealed that private schools evade tax in millions. The report exposes the account details of Beaconhouse School System, Lahore Grammar School, City School and Frobels School System. The private schools only pay taxes on their 7 per cent income, while annually increasing 10 per cent students fee.

30 November 2018

In its drive against non-filers, the FBR has issued notices to more than 3,000 high net-worth individuals who have assets like houses in the posh areas of big cities.

6 December 2018

The Regional Board, Rawalpindi of NAB has sent details of Rs60-billion tax evasion by the cigarette industry to NAB headquarters for investigation. The FBR could not meet its revenue target from the cigarette industry which is a major contributor to the national exchequer. Pertaining to that, the government has removed six members of the FBR who were responsible for revenue loss.

7 December 2018

The Directorate of Intelligence and Investigation (IR) Faisalabad of FBR conducted raids on various industrial and commercial units, M/S Real Aluminum Extrusion, M/S Punjab Aluminum Extrusion and M/S Al-Madina Dyeing and Finishing over tax evasion. The FBR seized computers, sales and purchase ledgers, cash books, gate passes, inventory record etc. and sent them for forensic audit.

12 December 2018

The federal government has started sending tax notices to big landlords including politicians. Office of Federal Tax Ombudsman (FTO) found out that three out of every four persons who declare agriculture as the source of income do not pay provincial agriculture tax.  The share of agriculture in the economy is about one-fifth but its share in total revenues is less than 1%, indicating huge tax evasion in the sector.

25 December 2018

The FBR has started a crackdown against 167 affluent people residing in Islamabad, Faisalabad, Gujranwala, Abbotabad, Lahore, Karachi and Hyderabad who have evaded taxes while buying properties and vehicles worth billions of rupees. The FBR has gathered information like Computerized National Identity Card (CNIC) numbers and financial information including pre-tax incomes and have sent it to the relevant regional tax offices. The notices asking them to explain their sources of income will be sent. Failure to comply will result in penalty and legal action.

26 December 2018

After finding out massive tax evasion in international contracting firms through execution of multimillion-dollar donor funded projects, the FBR has decided to inspect the accounts of 133 international contracting firms operating in Pakistan. According to tax laws, the money provided to these donor agencies are exempted from taxes but after outsourcing projects to third parties they become liable to pay taxes. The investigations say money of millions of dollars go back into pockets of donors and their attached international contractors.

31 December 2018

The FBR has established a special departmental to probe as many as 20 biggest tax evaders and it will start working from January 1, 2019. FBR confiscated the financial records of Jalal sons as part of its initiative to act against tax fraud. Rs10 million is to be paid by Jalal Sons as tax every month but they were only paying the amount of Rs400,000 while tampering the retail chain’s sales records.

2 January 2019

In a nationwide campaign to detect tax evaders, FBR has launched door to door survey for collection of information from thousands of residents living in posh areas of the major cities. The campaign has started from posh sector of E-7 Islamabad in which one-page survey will be distributed among the residents. The FBR is seeking details about the name of the owner, the Computerized National Identity Card (CNIC) number, National Tax Number (NTN), occupation/profession, date of acquisition of property and monthly rent.

This campaign will be expanded to Defense Housing Authority and Bahria Town in Rawalpindi and other posh areas of Karachi, Lahore and Peshawar in the coming weeks. All the survey forms shall be handed over to Pakistan Revenue Automation (Pvt.) Ltd (PRAL) team on daily basis for data coding and cross matching.

10 January 2019

The Large Taxpayers Unit (LTU) Karachi of FBR has detected tax evasion of around Rs2 billion by sugar mills through suppressing sales. The FBR has recovered around Rs500 million from one sugar mill and issued another five notices to other sugar mills for recovery of the remaining Rs1.5 billion. The LTU took action against all 30 sugar mills located in Sindh after decline of revenue from Rs23.45 billion in 2016/17 to Rs19.87 billion in 2017/18 despite record production.

18 January 2019

The PTI government has decided to give tax authorities access to the family tree database of citizens as large number of people have properties in some one else’s name. Some of these people have been unearthed by the FBR during its latest drive against 380 top tax evaders. A joint investigation team (JIT) of the Federal Investigation Agency (FIA) found that Rs42 billion was laundered through 29 fake bank accounts and Benami assets. In Karachi, Rs87 million worth of vehicles have been registered in the name of a person who died in August 2016.The Benami Act 2017 has not become operational yet and it has allowed people to easily keep properties in the name of others.

6 February 2019

The FBR froze the bank accounts of Independent Media Corporation (Pvt) Limited, the owner of Jang newspaper and Geo News Network. The corporation was notified to pay the taxes before 31st January, but it failed to pay. The sales tax between the period of July 2004 – June 2006 and May 2007 – September 2007 were not paid by the organization.

8 February 2019

The government has received information about 150,000 bank accounts of Pakistanis abroad from 29 jurisdictions after it made formal requests to 10 countries under the Organization for Economic Cooperation and Development (OECD) treaty. This is to get information about Pakistanis who stashed their assets abroad to evade taxes.

20 February 2019

PM Imran Khan has directed FBR to intensify actions against tax defaulters and bring high net worth individuals into the tax net by using data matching and third-party information through IT systems and integration of data among different departments. He further directed the FBR to expedite efforts for making Benami Transactions Prohibition Act operational, which would empower tax officials to confiscate properties held in other than owners’ names. The FBR informed that revenue apprised that mapping of 2,000 plazas have been completed, while automatic system to collect tax has been installed at over 2,500 points of sale.

24 February 2019

The Regional Tax Office (RTO) Faisalabad has unearthed 12 Benami accounts. The RTO’s campaign against tax evasion has yielded results with 34% increase in tax collection in Faisalabad. According to Chaudhry Muhammad Tarique, Chief Commissioner of RTO Faisalabad, his teams have also uncovered a mega fraud committed by three mills in Jhang, which were committing fraud through understating of sales through fake sale and purchase invoices. He further said that RTO had selected 62,000 audit cases and recovered Rs700 million in January 2019.

8 March 2019

The government has included media persons, sportsmen and real estate tycoons in its hunt list of top tax evaders. According to FBR officials, the government has decided to pick top 100 cases from every Regional Tax Office (RTO) and Large Taxpayers Unit (LTU), which will expand the final list to 2,400.

19 March 2019

Punjab Revenue Authority (PRA) has come up with a novel solution to check the tax evasion under a project called ‘Blue Sky Thinking’. PRA will employ camera-equipped drones to monitor various tax bases like real estate, construction projects, warehouses and marriage halls. Chairman PRA Javed Ahmed said that the mapping of the technology will be carried out in April 2019 and the technology will enable to determine the actual number of participants in an event.

28 March 2019

The FBR has recovered Rs3.4 billion by crackdown against evaders of Income Tax and Sales Tax and through raids on different premises. In another campaign against tax evasion, the FBR made nine arrests, attached 76 properties and 46 vehicles. To recover the massive shortfall in tax collection, FBR has launched different campaigns in last two months. The shortfall might stand at Rs485.9 billion till end June 2019.

Ensuring full autonomy of National Accountability Bureau (NAB) and other accountability institutions like FBR.

8 November 2018

The federal cabinet decided to separate FBR from tax policy formation to promote transparency on 8th November. It will ensure autonomy and FBR will be independent of any government influence.

Tahir Dhindsa, Senior Analyst and Journalist, talks about the government’s control over NAB and FBR.

8 March 2019

PM Imran Khan has given a warning that if FBR fails to perform the duty of tax collection, then a new tax collection body will be formed.

Strengthening institutions including the FBR, Auditor General’s Office and FIA as well as parliamentary bodies especially the Public Accounts Committee.

30 November 2018

In order strengthen the operational capabilities at the FBR, reforms to enhance its analytics capability, introduce technology-based surveys in major commercial areas and install electronic systems to check phone smuggling, speedy resolution of pending litigation and audits, activation of alternative dispute resolution mechanism, collection of pending arrears and improved audit will be taken.

6 February 2019

The FBR is under pressure due to its inability to broaden the tax base and achieve its revenue collection targets. It faced a shortfall of Rs191 billion for the July-January period. The government wants the FBR to increase its tax collection through enforcement measures.

In order to strengthen the FBR’s capacity, the PM Imran Khan has directed the Establishment Division to expel within a week all FBR officers serving on commission in other departments. The FBR chairman has also been given two-week deadline to improve the image of his tainted department. The PM ordered reconstitution of the board of the National Database and Registration Authority (NADRA). NADRA’s role is critical in the government’s drive to broaden the tax base through the use of information technology.

9 February 2019

FBR is looking to collaborate with researchers and experts to develop efficient and effective analytical tools as the government is planning to utilize the transaction data to broaden the tax base. This involves usage of third-party data, such as travel, bank accounts, car and property ownership, children studying abroad and high-fee schools.

30 March 2019

The federal government has set up three new tax collection institutions, Directorate General of International Tax Operations, Output Coefficient Organisation (IOCO) and Directorate General of Broadening of Tax Base  to impose and collect taxes on undeclared offshore assets and income and bring illegal assets worth billions of rupees stashed abroad into the tax net.

Crack down on corrupt practices that promote tax evasion.

14 September 2018

According to FBR, a loss of more than Rs300 billion has been inflicted to national exchequer as hundreds of foreign companies, which had entered into joint ventures with Pakistani firms continue to evade tax for the last seven years. They continue to evade tax under their ‘nonresident’ status but Income Tax Ordinance (ITO) section 84 states that their status changes to residents when they enter into a joint venture with locals. FBR chairman Jahanzeb Khan, has recommended taking action against corrupt officers responsible this loss as FBR officials were favoring those companies by keeping silent after they lost cases in the court of Federal Tax Ombudsman (FTO).

Fakhar ur Rehman, Senior Correspondent, CNN Turkish, explains the progress, challenges and limitations of the government to recover looted money of the country.

18 October 2018

The Computerized Risk-based Evaluation of Sales Tax (CREST has identified suspicious activity where people are declaring continuous carryforwards without making any payment of sales tax. CREST is a software of FBR. FBR has sent the details of top 100 registered persons who are involved in said practice to the regional tax offices (RTOs).

11 November 2018

The Directorate of Intelligence and Investigation (IR) Lahore of FBR has discovered 11 fake textile manufacturing units involved in an overall tax evasion of Rs522 million between 2014 and 2018. The FBR is going to register criminal cases against the tax thieves for the recovery of the stolen amount. An investigation to find more sources obtaining sales tax exemption through the registration of fake manufacturing units is also going on (The Express Tribune, 11 November 2018).

14 January 2019

102 Kanals of Land owned by Overseas Pakistanis Foundation (OPF) have been recovered from land mafia that was considered untouchable earlier. The influential land mafia illegally occupied a part of the acquired land. A number of attempts made by the OPF officials to recover the land were unsuccessful. Zulfikar Bukhari, Special Assistant to Prime Minister on Overseas Pakistanis said that the writ of the government has been established and no such transgressions will be tolerated in future.

9 February 2019

The PTI government has decided to convert almost all the prize bonds into some registered instruments from bearer. Prize bonds can be bought from markets and used as a tool for tax evasion and money laundering because identification of money trail is extremely difficult.PM Imran Khan has already approved the conversion of Rs100,000 prize bond into a registered instrument and the process of conversion of Rs40,000 prize bond is also in progress.

29 March 2019

The FBR has issued instructions to all Large Taxpayer Units, Corporate Regional Tax Offices and Regional Tax Offices to extend office hours on Friday and Saturday to facilitate taxpayers in payment of duties and taxes and filing of income tax returns. FBR has managed to bring 2,671 people in the tax net and recovered nearly Rs1.4 billion.