Majority of the companies have declared losses, or "nil income", in the corporate income tax returns filed up to December 2008, and compliance level of top 20 corporate sectors has been below 50 percent during this period. The FBR ''quarterly review'' has conducted a ''gap analysis'' of corporate returns to ascertain the potential growth vis-à-vis the department''s efforts with regard to the ''Returns''.
The results showed that out of top 20 corporate sectors, the compliance level in submitting the income tax returns is less than 50 percent. Within the tobacco and tobacco products sector, a total of 19 companies had filed their returns against 82 companies registered with the Securities and Exchange Commission of Pakistan.
Out of 405 hotels/restaurants registered with the SECP only 108 filed income tax returns. In chemical sector, 314 filed returns against 1092 registered with the SECP. Within the pharmaceutical sector, 413 were return filers against 939 companies registered with the SECP.
Around 226 electronics and allied units filed returns against 561 companies registered with the SECP. Out of 686 companies (POL marketing and refiners sector), 180 had filed returns. The units dealing in food products filed 739 returns against 1453 companies registered with the SECP.
In case of paper and paperboard, 213 filed returns against 491 companies registered with the SECP. About 25 fertiliser units filed returns against 57 registered with the SECP. Out of 150 beverage companies registered with the SECP, 43 filed their returns. The income tax returns received from sugar units were 72 against 159 companies registered with the SECP. Out of 397 power, hydel, thermal generation companies registered with the regulator, 156 filed income tax returns.
Within the telecom sector, 148 filed income tax returns against 759 companies registered with the SECP, reflecting only 19.50 percent compliance. Out of 3744 textile units registered with the SECP, 1,624 filed returns. A total of 39 cement units filed returns against 105 companies registered with the SECP.
The analysis further showed that the number of corporate returns filed during first half (2008-09) registered a growth of 8.5 percent. Now, to analyse the potential of increasing the compliance of corporate sector, it is better to review the SECP data. The given data not only shows poor compliance of only 34 percent on the part of the corporate taxpayers, but also leaves a viable room for the department to broaden the tax base and improve collection by nabbing 33,522 corporate non-filers as registered with SECP.
Data showed that out of 50,952 corporate entities registered with the SECP, only 17,430 corporate returns were received till December 31 2008, reflecting compliance of 34 percent. The deficiency in compliance reflects that 33,522 companies did not file returns as compared to the registered companies with the SECP.
By analysing the returns received from the corporate sector during first half of 2008-09, the data gives another gloomy picture. Out of the total returns filed only 24percent declared income and 76 percent were without any contribution to the federal revenue. The trend in the corporate sector to declare income has registered a growth of 9.4 percent.
A further in-depth analysis of the corporate entities sector would provide a comprehensive picture to ascertain and pinpoint the non-compliant sectors so as to devise a strategy accordingly. It is well evident that of the top 20 corporate entities, except five sectors, the compliance level in submitting the returns was less than 50 percent.
The sector-wise analysis of corporate case with respect to the declaration of income and loss was also quite dismal as the percentage of cases declaring income in all the listed major 20 corporate entities were less than 50 percent, and majority of the companies were either declaring loss or nil income.
The question here is how a company is surviving over the years by continuously declaring losses? This aspect must be probed in by conducting detailed field audit. As far as the contribution of revenue is concerned, top five sectors contribute 80 percent of total revenue received with the corporate returns. Owing to this uneven composition and reliance on a few entities of corporate sector is not at all promising for the overall health of the economy.
Thus a detailed analysis and probe is reiterated to get the maximum revenue from the rest of the non-compliant entities of corporate sector. As far as the growth is concerned the telecom, chemical and POL sectors showed healthy trends of growth as compared to the previous year, the report added.
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