The government is considering stricter policies against tax non-filers in the upcoming budget for tax year 2020-2021.
The government has set up Tax Information Processing Unit in the Federal Board of Revenue’s headquarter in Islamabad. It will depute experts who will assess and investigate tax data. Large transactions, tax defaulters and fake (Benami) accounts will be investigated in particular.
The data acquired by the FBR will be mined and investigated using information technology and automated (computer-generated) notices will be sent to those who frequently travel abroad and buy new cars. Defaulters will be penalized as well. The government has issued instructions to officers at field formations to meet the tax collection target of Rs5100 billion.
Pakistan has one of the lowest tax-to-GDP ratios in the world. In the first nine months of the current fiscal year, the taxes collected as percentage of GDP were only 8.2%. The government’s deficit, the gap by which its expenses exceed its revenues, was Rs1,686 billion for the period. The government updated its active taxpayers list in March, noting only 2.4 million people filed their tax returns for fiscal year 2019, this was 13% less than the previous year’s 2.7 million.
The government has not been able to meet its tax collection target and the budget deficit is likely to shoot to 10% of the GDP this year. It was less than 9% the previous year. This has been the case for years and lower tax revenue leads to deficit or loss, which leaves the government with little to no money to spend on its people. To plug this gap, the government resorts to borrowing. This practice has created a mountain of debt over the years. As per the latest data, loan repayments account for 40% of the government’s spending.