Transparency International Pakistan has claimed that the government has failed to implement its recommendation made on the order of the Supreme Court of Pakistan in Oct 2013 which would have increased revenue collection from Rs 1,942 billion to Rs 4,000 billion. It has further recommended that measures be taken to plug Rs 2,000 billion revenue leakage, under the same order, which Federal Board of Revenue (FBR) has not been able to control.
In a letter sent to Federal Finance Minister, Ishaq Dar on May 20, TI-Pakistan Adviser, Sohail Muzaffar has invited his attention to the report prepared at the behest of FBR by International Centre for Public Policy, University of Georgia estimating over Rs 1,800 billion tax evasion annually. "The FBR report of Rs 1,800 billion short collection of taxes, confirms the TI Pakistan report which had indicated Rs 2,000 billion shortfall in collection by FBR, submitted in the Supreme Court of Pakistan on Oct 3, 2013", he said.
He informed the minister that in the civil misc application 2013 filed in the Supreme Court in the suo motu case regarding law and order situation in Karachi, on Oct 29, TI-Pakistan was asked by the Chief Justice of Pakistan to provide a rough figure of annual leakage in collection of FBR revenue. The Supreme Court was informed that public is paying taxes, but the businessmen are not fully depositing the FBR revenue in treasury. Further TI-Pakistan was informed that due to the malice of flying invoices, the GST adjustments are mostly on fake documents. On a question asked by the Chief Justice of Pakistan, as to what measure could be taken to plug this huge tax loss, TI-Pakistan had stated that "if the political will of the government and Chairman FBR is there, the scheme for achieving the goal of zero tolerance against corruption could be prepared by TI-Pakistan, and that this scheme will ensure the Tax GDP ratio to increase from 8 percent to 16 percent in one year.
The Chief Justice had directed TI-Pakistan to prepare the proposals and submit it in the apex court on Oct 30, 2013. Sohair Muzaffar said the proposal was submitted on Oct 30, 2013, which needs to be implemented in toto, and "is sure to generate approximately additional Rs 2,000 billion tax. Loss of one day may result loss of Rs 6 billion revenue.
The minister has been requested to examine the TI-Pakistan proposal for the budget of 2014/15, and if possible act on the recommendations which are very simple and easy to apply. In accordance with the orders given by the Chief Justice on Oct 29, 2013, Syed Adil Gilani the then advisor, TI-Pakistan had submitted following recommendations to curb tax evasion in FBR, and make it a department of "Zero Tolerance against Corruption," and plug the estimated tax leakage of Rs 2,000 billion per annum. The recommendations had covered customs, administrative and technological measures, risk management of containers, transportation of containers, en route monitoring, and receipt of containers at border customs-stations. Legal mid-term and long-term measures, recommendations were also made to broaden income tax net. Similarly, major corruption was identified in refund of sales tax and its adjustment. "As a policy, FBR should abolish adjustments and refund." If FBR makes irrevocable policy of No Refunds No Adjustments total GST leakages by frauds/evasions, will be stopped.
Transparency International Pakistan had also proposed on how to collect GST and WHT on pre paid card and had recommended new procedure for tax collection. It had also recommended that Judiciary to facilitate FBR in its revenue recovery. It was reported in January 2013 that while total stuck-up amount of the Federal Board of Revenue (FBR) in 351 cases stood at Rs 225 billion in different courts including the Supreme Court, high courts and tribunals of the country.
a. In case of appeal, litigation against FBR assessments, National Saving Certificates shall be deposited by the litigant in the court.
b. In case the court overturns the FBR assessment, strict administrative action shall be taken against the official of FBR for imposing wrong tax. This step will eliminate the harassment (for taking bribe) alleged to be the main purpose of making the false assessments by FBR officials.
c. In case for custom dues, any party does not pay the taxes, nor make any appeal, the imported goods shall be auctioned within one-week time after expiry of the allowed period to pay.
d. In case of any FBR tax defaults, courts shall announce judgements within 90 days.