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 Chartered accountants accused of helping people evade tax

Chairman Federal Board of Revenue (FBR) Mumtaz Haider Rizvi, here on Friday accused chartered accountants and tax practitioners of helping taxpayers to commit tax evasion as a tax gap of over and above Rs 800 billion exists, which needs to be narrowed down.

During a pre-budget seminar organised by the Association of Chartered Certified Accountants (ACCA) here on Friday, FBR Chairman clearly pointed his figures at chartered accountants, saying that "you are helping the corporate sector in committing such acts." This was for the first time that an FBR Chairman accused chartered accountants publicly of helping taxpayers commit tax evasion.Talking about the existing tax gap and level of evasion in the country, Rizvi said that 79 percent tax gap exists in direct taxes.

Out of 79 percent tax gap of the direct taxes, 65 percent of the tax avoidance and tax evasion has been committed by the corporate sector alone, which claims to be the most documented sector and chartered accountants and tax practitioners are helping them in doing so.

Giving examples of leading sectors which are paying meager amount of direct taxes, FBR Chairman said that cement industry claims that it has paid Rs 200 billion, however, he said that this amount was charged from consumers and paid to the national kitty.

The indirect taxes charged from consumers cannot be claimed as actual tax of the cement sector paid on their profits and income.

Contrary to this, cement sector has paid no income tax during last four years.

Similarly, other major sectors such as oil companies and sugar industry are paying negligible amount of taxes and direct tax collection from textile sector is also showing negative trend.FBR Chairman said businessmen are forced to pay bribe to around 38 institutions/organisations and how the people would be able to do business in this environment.

We should end blame game now and start realising the truth, if any body is paying Rs 10 as bribe to FBR employees he is actually saving his Rs 90 and also putting corruption allegations on tax machinery.

If, FBR employees are corrupt than what about those who are responsible for enjoying gains of Rs 90 by giving bribe to tax employees.Giving a realistic picture of the prevailing tax culture, he said that the tax authorities cannot correct all wrongdoings in one day, however, it has started its journey towards a new dimension for transparent tax system in the country and this journey would help in secure future of coming generations, he added.He said that under the Constitution, taxation of agriculture and services sector is the right of provinces and it is the duty of the provinces to increase their revenues for improvement in the tax-to-GDP ratio as it is the national obligation.Chairman FBR mentioned that the public is worried about the economic conditions of the country everybody knows the challenges faced by the economy and the country.

Current account deficit, trade deficit and budget deficit are growing.

Tax gap is widening, energy crisis is impacting growth and economy, debt is rising and its repayment would burden the national kitty.He said that the solution is very simple and it is not rocket science to correct things.

He said that new team at FBR has started from beginning to correct the existing affairs keeping in view the mistakes committed in the past for chalking out a future road map.Member of the Tax Reform Co-ordination Group (TRCG) and former FBR Chairman Abdullah Yusuf said that most of the countries in the world have online access to taxpayer's bank accounts for checking accurate payments of direct taxes.

The third party information from different sources and data warehouse plays an important role in determining the accurate income of the taxpayers.

In Pakistan, there is an issue of secrecy of bank accounts and tax department face difficulty in having access to the information about the accountholders.

However, most of the tax administrations across the globe have direct access to the bank accounts of the taxpayers.

The online information about each and every accountholder is available to the tax authorities as citizens are required to pay a certain percentage of tax to the government.

If you are not paying the tax than you are trying to avoid the tax payment required under the law.

These types of online system enable the tax authorities to access the third party data for determining actual tax liability of the persons.Leading chartered accountant was of the view that Presumptive Tax Regime was introduced in the past keeping in view of the cash economy in the country.

The un-documented economy has resulted in introducing such kinds of schemes like PTR.The tax gap in the country is as high as up to Rs 800 billion or more which point towards systematised efforts through effective IT systems like Integrated Tax Management System (ITMS).

The ITMS has taken away the discretionary authority of the tax officials.

The results of the third party information are visible at the level of the FBR and the notices have been served to potential persons on the basis of third party information available with the tax department.

He said that the CNICs should be used as single identifier for all business activities and transactions.In the current circumstances, the government has to take some major decisions to increase the Tax-to-GDP ratio.

We have been left with no option but to take all kind of measures to improve revenue collection and broaden the tax base, Abdullah Yusuf added.Responding to a query on tax exemption granted to the Independent Power Producers, top chartered accountant stated that the government of Pakistan had entered into the contracts with the IPPs for extending tax exemption in the past.

The tax exemptions were given to the IPPs under the arrangements agreed with the government of Pakistan.

Any change in the taxation regime would have cost on the electricity tariff and the exemptions already granted to the IPPs cannot be withdrawn under the government's commitments with the IPPs.

However, for new IPPs the government can chalk out any new tax policy, he added.

Source: http://www.brecorder.com/taxation/181/1183503/