Tax directory found wanting

The Federal Board of Revenue recently released the fourth wave of tax directory earlier this month. But as far its companies directory is concerned, the story behind the numbers stands little changed over 2013.

Let’s start with what has changed. Three years ago, the top four companies accounted for about a quarter of the total tax collection. In FY16, the top four companies accounted for 14 percent of total collection. This is largely because oil firms, many of which are from public sector, have not been faring well in the face of lower oil prices. As a result, banks have surfaced to become the top tax payers.

The rest of the story is pretty much the same. The percentage of SECP-registered companies filing tax returns remains dismal at 43 percent, inching one percent higher over last year, and only 4 percent up over three years ago. Clearly, those notices are not working.

The bulk of tax collection in 2016 came from 0.2 percent of the filers, unchanged from 2013. The number of tax filers who filed a zero return, however, increased from 44.6 percent of the total in 2013 to 49 percent in 2016.

The same is true for new tax filers – filers whose NTNs were not published in FBR’s FY15 tax directory. Seventy seven percent of the new tax filers filed a zero tax return in 2016, whereas 0.2 percent of those accounted for nearly 58 percent of the total tax paid by new tax filers.

The new tax filers paid a total of Rs4.2 billion, which is about 10 percent of the increase in tax collected by SECP-registered companies in FY16. Most of the top 10 new tax filers are from energy, or infrastructure sector from China or Europe.

Interestingly, while the FBR was able to rope in 5591 companies into the tax net in FY16 – the total increase in companies filing returns was only 3268 companies. This implies that about 2300 companies who filed a return in FY15 did not file one in FY16. Is that because all those companies have ceased to exist or because they consider themselves exempt from filing a return?

Alas! Despite repeated demands by the media and the think tanks, FBR has failed to revamp its tax directory to make it into a document that offers insight into the economy and into the performance of its own machinery.