A slippery customer: Corporate sector ‘evades’ Rs415 billion in taxes

ISLAMABAD: Federal Board of Revenue (FBR) Chairman Mumtaz Haider Rizvi has said that the corporate sector is evading Rs415 billion in taxes annually in connivance with chartered accountants.

He was speaking at a pre-budget seminar organised by the Association of Chartered Certified Accountants (ACCA) of Pakistan here on Friday.

Out of the Rs800 billion annual tax gap, the income tax gap was 79% and 65% of that gap (Rs415 billion) came from the corporate sector, which avoided paying taxes in connivance with the chartered accountants, said Rizvi.

He also asked the “country’s rich” to sweep their own doors first, before asking for sweeping the doors of FBR. “If you give a bribe of Rs10 to a tax official, you also steal Rs990,” said Rizvi, who admitted the existence of loopholes in the tax collection system.

Almost all multinational companies were evading taxes, he said. He countered their claim that they were paying taxes, saying they paid sales tax and that too after recovering from consumers.

Rizvi said these big firms were showing losses on their investments and cited the example of cement manufacturers, who have been showing losses for the last four years and same is the case with most of the oil companies.

Speaking about budget priorities, Rizvi said from July 1 the government would withdraw most of the statutory regulatory orders (SROs) in a bid to simplify the complicated tax codes. He said the slabs of customs duties would be reduced to either five or six from the current nine slabs to simplify the tax codes.

However, the government will not withdraw four SROs to protect some industries, including the automobile industry.

This is contrary to what Planning Commission Deputy Chairman Dr Nadeemul Haque has claimed. According to him, the government will withdraw the four SROs.

Rizvi announced that the tax system would be simplified further and made transparent and predictable. “The next budget will be investment, employment and growth-oriented.”

He said tax rates would not be increased, certain duties would be reduced and some tax brackets would be slashed. “One who earns more should pay more,” he remarked.

Tax exemption for IPPs

In a case of double standards, former FBR chairman Abdullah Yousaf gave a lecture on paying taxes for the welfare of the nation, but when asked whether he would advise the government to withdraw the income tax exemption granted to the independent power producers (IPPs), he replied “this is not the option”.

Yousaf is the chairman of IPPs Advisory Committee and also a lead adviser to the government on increasing the tax base. The government has exempted IPPs income from tax that costs billions of rupees in lost revenues.