In Pakistan there is no reliable data for the number of Association of Persons across the country; the main reason being that there is no central authority to collect that data from all the districts where the AOPs are registered. Crude estimates suggest that total AOPs are at least five times the number of SECP-registered companies (which was 72500 as of FY16). Yet, the Federal of Revenue was able to rope in only a little more than 48000 AOPs by the end of June 2016.
FBR’s poor performance in on-demand tax collection can also be gauged by the fact that growth in the number of AOP filers in FY16 slowed to 8.6 percent as against a growth of 9.2 percent in the year before. Likewise, the growth in tax collected from AOPs slowed to 11.6 percent in FY16, down from nearly 36 percent in FY15.
The growth in tax collection is disproportionate to the increase in AOP tax filers in FY16. In 2015, a 9 percent increase in AOP tax filers had led to 36 percent growth in tax collection. In 2016, an 8.6 percent increase in tax filers led to only 11 percent growth in taxes. Does it not sound strange at a time when share of zero return filers in total AOP filers is about the same in both years?
Perhaps the answer to that question lies in the fact that the share of zero return filers in ‘new tax filers’ is rather high at 62 percent – as against an average of 36 percent in the last three years. This leads one to suspect that new AOP tax filers are not being ‘honest and ameen’. For definition sake, this column assumes ‘new tax filers’ to be those businesses whose NTNs featured in FBR’s FY16 tax directory but did not feature in its FY15 directory.
In another interesting development, FBR’s FY16’s tax directory reveals that the revenue office was able to rope in 8771 new filers. Yet the total increase in filers was 3847 in FY16. This implies that about 4900 filers who had filed a return in FY15 did not file in FY16.
New AOP filers, however, yielded Rs2.4 billion in taxes, which is 43 percent of the total annual increase in tax collection from the AOP in FY16. From these new filers, one filer alone paid Rs618 million in taxes, accounting for 25 percent of the tax paid by new filers. This shows the potential that exists out there.
Interestingly, as was in the case of new filers from the SECP-registered companies, leading tax payers from the list of new AOP filers are also from power, construction, infrastructure, and logistics business. Should this be read as the signs of growing sectors of the economy? We leave that for readers to ponder upon.
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