Provinces found involved in Rs33bn federal tax evasion

ISLAMABAD: All the provincial governments have been found involved in massive tax evasion and in recent few years, as per the calculation of Auditor General of Pakistan, the provinces did not deduct and remit to federal treasury Rs33 billion of federal taxes.

In the case of a public university in Punjab, Rs166 million was deducted as income tax from employees’ salaries but the management spent the money in running the affairs of the university.

Documents available with The News show the Auditor General of Pakistan Office approaching the provincial governments at the highest levels but the evaded federal tax amount has not been deposited as yet.

According to the letters written to the chief secretaries of all the provinces, the Punjab government did not deduct and deposit to FBR/federal treasury tax worth Rs16.3 billion, Sindh evaded tax totaling Rs8.60 billion, KP is required to deposit Rs5.07 billion tax evaded whereas Balochistan is found not to have deducted tax worth Rs2.34 billion.

The Auditor General Office took up the matter with the provinces and issued reminders as well but still the evaded tax amount has not been deposited to the FBR or federal treasury.

The official communication between the AGP and the provinces show that the tax evasion in question relates to five financial years from 2017-18 to 2021-22.

All the four provincial chief secretaries were reminded that as per the relevant constitutional provisions and existing rules of Federal Board of Revenue, federal taxes must be deducted and remitted to FBR/federal treasury, which is the prime responsibility of all withholding agents, including provincial governments.

However, it has been observed that deductions of these taxes are not made timely nor they are deposited in the federal treasury, causing loss to the national exchequer.

Upon the direction of Auditor General of Pakistan, details of audit paras relating to federal tax for five years from 2017-18 to 2021-22 in provincial and district audit reports of all the four provinces have been consolidated and highlighted that an amount of Rs16.3 billion was not deducted by the department/withholding agent concerned of the province of Punjab. In case of Sindh, KP and Balochistan, this amount is Rs8.60 billion, Rs5.07 billion and Rs2.34 billion respectively.

All the provincial chief secretaries were reminded to do the needful but the Auditor General Office did not receive any positive report.

Another document reveals that the tax evaded by the provinces include income tax not deducted from salaries of different categories of officials. In the case of a public sector university in Lahore, an audit document reveals that the university withheld income tax at source from the salaries of employees on a regular basis.

The withheld income tax amount of Rs166 million was not deposited in government treasury/FBR during the period of 2019-23. Instead, this amount was utilised by the management for running the university affairs.