3,282 companies declare losses in returns, 2,716 show income up to Rs one million

Around 3,282 companies have declared losses in their income tax returns excluding those operating in Presumptive Tax Regime (PTR), reflecting level of compliance and tax payment. Giving several examples of poor tax compliance in Pakistan, Chairman Federal Board of Revenue (FBR) Anser Javed informed Senate Standing Committee on Finance on Monday that the 3,282 companies declared losses in returns.
Only 2,716 companies declared income up to Rs 1 million. The data itself talks about the sad state of affair in the tax-related matters especially under the facility of USAS. The FBR had introduced the concept of the Universal Self Assessment Scheme (USAS) to empower taxpayers to voluntarily declare any thing in his income tax return. Around 98 percent of the taxpayers are filing their returns under the USAS. Only 813 individuals and Association of Persons declared their income above Rs 6 million.
He further said that merely 0.8 percent income tax return filers exist in the country whereas Tax-to-GDP ratio has reached below 9 percent. The FBR's major concern is that the National Tax Number (NTN) holders are not filing their income tax returns. Only obtaining NTNs from the tax department would not serve the purpose, but the NTN holders have to file their income tax returns. The FBR wanted to increase the number of return filers through effective enforcement.
He said that all withholding taxes rationalised in budget have been made adjustable to encourage documentation. These are not final or minimum tax but made adjustable to enforce return filing. Taxpayers can take credit of the adjustable withholding taxes by filing their income tax returns. For example, 10 percent adjustable withholding tax has been imposed on marriage halls. Similarly, all withholdings have been made adjustable to broaden the tax-base. This would not create any problem for the existing taxpayers operating under the tax net.
Referring to India, he said that the Indian taxpayers have to report each any every transaction above Rs 2 lakh to the Indian tax authorities. However, FBR has not proposed any such harsh tax measures in budget (2013-14).
To a question on tax slabs for salaried class, FBR Chairman said that the serious discrepancies have been witnessed in the tax slabs structure for salaried class in last budget (2012-13). The proposed highest tax slab of 30 percent is still lowest in the region when compared with India and Sri Lanka. In regional countries the highest tax slab is up to 35 percent on salaried class.
On the questions of issuance of budgetary measures through SROs, he clarified that the SROs have been separately issued and not part of the budget proposals.
When asked about delay in sales tax refunds, he said that it is an administrative issue and the FBR is ready to develop some mechanism in consultation with the Finance Committee in this regard.