KARACHI: Rashid Mahmood Langrial, Chairman Federal Board of Revenue (FBR) revealed widespread corruption within FBR during an address to the business community at the Federation of Pakistan Chamber of Commerce and Industry (FPCCI) on Wednesday.
Langrial disclosed that FBR officers had informed him of a “speed money scheme,” where 5 to 10 percent of total tax refunds are collected as bribes to expedite the release of pending refunds. In response to this revelation, he announced plans to digitalize the refund process to combat corruption.
He said that inflation and policy rate were expected to be reduced by 3 to 4 per cent till the end of the ongoing fiscal year. Elaborating the cause behind stagnant Tax-to GDP ratio, he said that the FBR collected Rs. 3.1 trillion in 2016 and there was no improvement in revenue collection, which still stood at Rs. 3.1 trillion in 2024, if we took inflation, currency depreciation and other factors aside.
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Langrial took responsibility for the low Tax-to-GDP ratio, admitting that the scarcity of honest officers within the FBR has hindered efforts to broaden the tax base.
Addressing the country’s economic challenges, Langrial emphasized the need for change, stating, “Now we have to change our habit to run the country as I haven’t seen breathing windows anymore that supported our economy in the past, due to geopolitical situations.”
The chairman FBR shared concerning statistics about tax compliance, revealing that only 29 percent of high-income earners comply with tax regulations, compared to 95 percent compliance among salaried individuals.
He noted that while 5 percent of the total population earns taxable income, only 1 percent of individuals who could potentially contribute Rs. 1.7 trillion in income tax are currently paying a mere Rs. 500 billion.
“As our revenue collection is being utilized for debt services, the FBR officials have no option but to tighten the noose around the already registered business entities to meet its revenue collection targets,” Chairman FBR said.
Langrial also addressed recent controversies, including the collection of affidavits from Chief Financial Officers (CFOs), clarifying that this measure was intended to raise awareness about existing laws rather than introduce new requirements.
Earlier, Saquib Fayyaz Magoon, SVP FPCCI in his welcome address highlighted issues related to exports, SRO 350, smuggling, EPZA and others.
The event, which was attended by a large number of businessmen from various sectors, also saw the FBR chairman instructing member customs to focus anti-smuggling efforts at entry points rather than within Karachi.
As Pakistan grapples with economic challenges and attempts to increase its tax revenue, this frank admission from the FBR chairman highlights the urgent need for reforms within the country’s tax collection system.
Copyright Business Recorder, 2024
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