The Federal Board of Revenue has expressed concern over huge difference between the number of companies registered with the Securities and Exchange Commission of Pakistan and the companies who are filing income tax returns. Sources told Business Recorder on Thursday that the issue of broadening the tax base was discussed at the national tax conference held on August 13.
According to sources, FBR Chairman Ahmed Waqar has directed the income tax department to explore new avenues for broadening the tax base. He particularly referred to the growing number of companies but the falling number of return filers.
As compared to about 53,000 companies registered with the SECP, only 14,000 are filing income tax returns, he added. There is an immediate need of enforcement, compliance and measures to increase the number of return filers during 2008-2009.
The board is successfully achieving 20 percent growth in the number of filers of income tax returns every year. However, there is need to encourage companies to file returns on a regular basis. During the tenure of former Member Direct Taxes, the board had sought data of companies from the SECP to identify non-filers of income tax returns in the corporate sector. The exercise was aimed at reconciliation of number of SECP registered companies with the NTN database available with the tax authorities to search for new taxpayers.
Sources opined that when a company is registered with the SECP, the corporate watchdog dispatches the monthly report of the company to the income tax department. Thus, out of total companies registered with the SECP, it is not clear that how many companies are actually closed which are no more required to file income tax return. Similarly, there are many companies, which got registration using different names and carry out business with only one name. Therefore, these companies will not file returns for their registered concerns, which actually do not exist.
Sources said that the total number of companies having National Tax Numbers (NTN) is also not very encouraging as compared to the registered companies with the SECP. Around 55 percent of the total registered companies have obtained the NTN during 2007.
The FBR data of 2007 showed that more than 50 percent of corporate taxes originate from public sector corporations and a meager amount from private companies. The total number of NTN holders were 2.28 million, while live cases totalled at 1.70 million and the remaining were anfractuous cases. Out of total NTN holders, the income tax return filers were 1.23 million.
The analysis of returns revealed that there is a fairly poor compliance level where highly understated declarations were made by the business community. Non-serious attitude towards filing returns is evident from the fact that incomplete and deficient information has been submitted.
About trends in 'Business Income', data showed that 46 percent of corporations have shown business income of less than half a million. The bifurcation showed that 21 percent (or 891) corporations had business income of up to Rs 100,000 and 16 percent (or 662) corporations had business income of more than Rs 10 million.
Ninety-nine percent of non-corporate sector had business income of less than half a million ie 56 percent (or 248,256) had business income of up to Rs 100,000; another 36 percent (or 158,303) had business income between Rs 100,000 and Rs 200,000 and less than 1 percent (or 3892) had business income of more than Rs 10 million during 2007.
Out of 3996 corporations which showed losses, nearly 49 percent (or 1950) had business losses of up to half a million. Out of these, 23.3 percent (or 931) had business losses of up to Rs 100,000 and 2.3 percent (or 93) had business losses of more than Rs 100 million.
Of 1,162 non-corporate sectors taxpayers, 75.3 percent (or 875) had business losses of up to half a million. The bifurcation revealed that 44 percent (or 512) had business losses of up to Rs 100,000 and less than 0.5 percent (or 5) had business losses of more than Rs 50 million, data added.
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