With help of withholding tax data: Govt to go after 5m tax dodgers

ISLAMABAD: With the possibility of securing assent from the IMF’s Executive Board on Pakistan’s bailout package of $7 billion by the end of next month, the Shehbaz Sharif government is making plans to unveil a roadmap for bringing a potential 5 million tax dodgers into the tax net.

Top official sources confirmed to The News that the IMF’s Executive Board might consider Pakistan’s request for approving the $7 billion Extended Fund Facility (EFF) by the end of August 2024. “Based on withholding data, the government has identified 5 million potential tax dodgers across the country, who purchased property and vehicles and had gone abroad but never bothered to file their income tax returns,” top official sources confirmed while talking to The News here on Tuesday.

Prime Minister Shehbaz Sharif might allow sending tax notices to non-filers on August 14, 2024. So far, the FBR has been undertaking spadework to place a foolproof mechanism to dispatch tax notices to those who are tax dodgers in the real sense.

The sources said the rationalization of expenditures would be accomplished as the minister for finance was spearheading the assigned task to reduce the expenditure burden. The government has already announced reducing the Public Sector Development Program (PSDP) and the Ministry of Planning is busy rationalizing and reducing the number of those PSDP projects which would not be started from the current fiscal year. Although, the budget for 2024-25 got approved, the Ministry of Finance has not yet communicated the exact size of PSDP allocation for the current fiscal year. The PSDP’s official book is still unavailable.

The sources said the fiscal performance, especially on the FBR front, would play a critical role in successful completion of the EFF program. The IMF has assigned the FBR to fetch Rs12,970 billion. Sources pointed out it was very important how the FBR divides the revenue collection target for the first seven and five months respectively. They asked how much the FBR will be able to broaden the tax base. How digitisation of the FBR will become a success story?

The FBR has expanded the retailers scheme from 6 to 42 cities and slapped a fixed tax amounting from Rs100 to Rs30,000 per month, depending upon the valuation of the fair market value of shops in respective markets of the cities. There is a plan of the government to launch a crackdown on them. Under the IMF condition, the government also agreed to impose the Agriculture Income Tax (AIT) and under the Structural Benchmark, the provinces would amend the AIT by end of October 2024 and start collecting it from Jan 1, 2025. But if the FBR fails to meet the desired tax collection target on a quarterly basis, the IMF program would enter into a danger zone. The government knows this fact, so it is making plans to launch a countrywide campaign to bring the potential non-filers into the tax net.

The approval of the EFF package of $7 billion in August 2024 and then completion of the first review in October/November would be the most crucial ones for the IMF program because it could set the stage for improving credit ratings from international rating agencies, paving the way for an entry into commercial markets for foreign dollar inflows and launching international bonds.