EDITORIAL: Federal Board of Revenue (FBR) has finalised an enforcement plan for action at the level of field formations against unregistered wealthy individuals, including non-filers and nil filers, as per directives of Prime Minister Shehbaz Sharif.
The field formation would be tasked to issue notices to high-net worth individuals, with tracking to be undertaken through the dedicated FBR dashboard. After a desk audit of transaction data has been carried out, notices will be sent.
While critics would no doubt argue that this would not shut the existing floodgate of bribe-taking to end the process at this initial stage as beyond this stage the process gets more complicated, with costs rising exponentially as each subsequent audit stage is reached, yet what is concerning is the target set for number of notices as well as the estimated amount of recovery.
A Business Recorder exclusive reveals that desk audit of 200,000 high-net worth individuals will be undertaken and the target number of notices would be issued to 5,000 non-filers whose net worth is 26 billion rupees to 27 billion rupees with a projected tax collection of 7 billion rupees.
The success or otherwise of these directives remains to be seen but in this context it is relevant to note that French economist Gabriel Zucman’s proposal to tax 3,000 of the world’s richest billionaires by closing the loophole via 2 percent wealth levy which, he maintains, could raise as much as 250 billion euros.
Brazil, during the recently concluded G-20 meeting in Rio de Janeiro, echoed Zucman’s proposal to maintain that a global tax on the world’s 3,300 richest individuals could raise up to 250 billion dollars – a proposal that was first tabled in July this year at the G-20 forum when all 20 finance ministers recognised that “wealth and income inequalities undermine economic growth and social cohesion” and agreed “to engage cooperatively to ensure that high and ultra-high net worth individuals are effectively taxed.”
Carlos Cuerpo, Spain’s Finance Minister, supported the proposal, adding that “there is an element of redistribution of wealth that, if we listen carefully to the results of many of the elections that have taken place over the last years, has been demanded by our citizens. So we have to somehow respond.” Thus, both economic and political considerations were cited as the reason behind the need to tax the ultra-rich.
Oxfam has revealed that the top one percent in the G-20 countries account for 31 percent of total wealth, up from 26 percent 20 years ago. While comparable data is not available for Pakistan, yet there is evidence that poverty levels are rising, the World Bank calculated 41 percent poverty in Pakistan last fiscal year, a rate that equals Sub-Saharan Africa.
There is also evidence that this may have worsened during the past year, given that the private sector has been unable to raise wages in synch with the rate of inflation, accounting for 93 percent of the country’s total labour force, while the government has extended 20 to 25 percent pay raise for the 7 percent it employs at the taxpayers’ expense.
In addition, the spectre of large sums held by the elite in offshore accounts and in real estate abroad requires a more cooperative approach within the international framework/treaties to which Pakistan is a signatory but from which FBR has yet to collect taxes due.
It is important to note that while the linkage between taxes and politics is yet to firm up in this country yet what is patently obvious is that the leverage enjoyed by the elite in this country must be dealt with or else face the prospect of an increasing lack of social cohesion that may spill out on the streets.
Copyright Business Recorder, 2024
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