TFA Consultant

Directorate General of Intelligence and Investigation Inland Revenue (IR) Federal Board of Revenue (FBR) has conducted tax analysis of prominent Pakistanis – public office holders, Parliamentarians, generals, famous players, feudal lords/Waderas/Sardars, religious leaders, senior bureaucrats, judges, real estate tycoons and brokers, etc, to check their tax status, tax payments and verify their actual sources of income and expenditures under the national drive of documentation of the economy.

Sources told Business Recorder here on Friday that Pakistan has given insurmountable respect to a number of persons giving them the status of heroes having unlimited wealth with extra-ordinary popularity, but it is irony of the fate that nobody in the history has tried to check whether they ”heroes” are paying any tax or filing returns on regular basis.

For the first time the directorate of intelligence IR has carried out a “Prominent Pakistanis-Tax Analysis” and dispatched information about certain Parliamentarians and top cricket players to the field formations to verify their concealment of taxes and actual source of income. These are prominent Pakistanis of our society and known as heroes of Pakistan. However, their contribution of taxes would be checked through the ongoing exercise of the “Prominent Pakistanis-Tax Analysis”. Unless or until our heroes and prominent Pakistanis would not pay the due amount of taxes, the general public would not be encouraged to voluntarily come within the tax net. This is the right time to document the actual income of the prominent Pakistanis so that the people would follow the same route for expanding the tax net.

The fiscal intelligence and financial investigation are the core functions of the directorate of intelligence IR. The ongoing exercise would be carried out across the board in a systematic manner. The data of some Parliamentarians and top cricketers has already been collected and dispatched to the field formations. Within the category of professionals, the directorate has initially focused on prominent doctors to check their assets vis-à-vis their declared income. The FBR is not targeting any specific segment of the society, but data analysis of all categories would be completed in a phase-wise manner.

The directorate of intelligence IR is conducting tax analysis of various categories of prominent Pakistanis including public office holders and politicians – Bureaucrats, Generals, Parliamentarians, Judges etc; media persons- artists, models, singers, journalists, anchor persons, fashion designers, production houses, TV channels, media tycoons, advertisement agencies, owners of media groups etc, players (cricket, Hockey, Squash, Golf, Tennis etc), professionals- architects, ”doctors, chartered accountants, consultants, bankers, stock exchange and other brokers etc, academicians, literary figures and private school owners, prominent social figures, Philanthropists and NPO/NGO organisers, religious scholars, Ulema, Pirs and leaders etc, real estate tycoons and property dealers, hoteliers, caterers, hall/lawn owners etc and feudal lords, Waderas, Sardars, etc.

According to the sources, category of brokers would also cover brokers engaged in defence procurement activities and stock brokers. There are many prominent persons running NGOs but no body has ever asked them to disclose their assets or verify their tax payments. The directorate of intelligence IR would also conduct tax analysis of the high-ups on the NGOs. Some of the social figures have acquired a number of assets, but whether they have declared their assets in their returns or they have not even obtained National Tax Numbers?, sources raised question.

Sources said that the Directorate General (I&I-IR) is created with the specific aim of taking the spirit of the tax reforms further and assist the field formations in enhancing tax revenues. In this, it is tasked with the core function of economic and fiscal intelligence in addition to eking out avenues for broadening of tax base. In terms of the economic and fiscal research, the Directorate General is entrusted with discreet information gathering, processing and segregation on all tax related issues such as non-reporting, under-reporting, tax evasion, fiscal fraud and revenue leakages focusing on information.

In accordance with this mandate, the Directorate General has started collecting information about various classes of the society to unearth instances of both wilful and inadvertent tax evasion, and its dissemination to the field formation with a view to assist them in tapping their true tax potential for enhancing tax revenues. The current exercise is part of these efforts and is primarily aimed at scrutinising the cases of prominent Pakistanis in different fields with the two-fold purpose of ascertaining whether they are borne on tax roll and if so, whether they are discharging their tax obligations properly.

In the first part of this exercise, information has been collected about the national cricketers and cross-matched with their tax profiles. The reports have been generated highlighting instances of tax evasion. The generated reports are now being shared with the field formations for appropriate action warranted under the law. The scope of the exercise is intended to be subsequently extended to other segments of prominent Pakistanis.

About the information gathering, sources said that in strict adherence to its authorised jurisdiction, information has been collected from the various data sources such as the Pakistan Revenue Automation Limited (PRAL) database, tax profiles of the cricketers, and information available on the web and print media. No third party data has been collected nor has any person outside the FBR been contacted for collecting or processing of the information. In this sense, the collected information does not constitute all the data on the income and receipts of the individuals. However, the generated reports, in addition to providing concrete data wherever available, also pinpoint some key areas where further work at the level of the field formations could result in tapping the true tax potential in these cases.

The respective cases falling within the jurisdiction of various RTOs are disseminated accordingly by the directorate of intelligence IR for initiating proceedings with regards to the highlighted deficiencies keeping in view the prevailing legal provisions.

One of the cases of prominent Pakistanis revealed that a famous cricketer from Karachi that the top cricketer has generated huge amount of income, but paying nothing in the form of taxes. The cricketer has earned US $ 700,000 for playing the recently concluded Bangladesh Premier League. The details of the case said that no wealth statements have been filed by the said cricketer either in 2010 or 2011, whereas he is obligated to file these as his income exceeds the threshold for filing wealth statements. Wealth statements are therefore needed to be enforced. While scrutinising the enforced wealth statement, various declared assets may also be examined from the point of view of generating any income for the individual.

Through the Finance Act 2009, provisions of section 153 of the Income Tax Ordinance 2001 were amended and tax collected from payments made on account of services rendered made minimum tax liability. Previously, such deductions constituted full and final discharge of tax liability and receipts under the head ”services” fell under the presumptive tax regime. Thus, w.e.f. tax year 2010, receipts under the services are to be taxed outside the presumptive tax regime and the tax deducted thereon constitutes minimum tax liability. The taxpayer (cricketer), however, continues to declare services receipts under the presumptive tax regime.

In view of the quantum of receipts in the instant case, taxation of services receipts under the normal law is expected to generate tax revenue much higher than the presumptive tax regime due to the applicability of the higher slab rates and nominal expenses which the individual might have incurred while earning income under this head. The amendment u/s 122 of the Income Tax Ordinance 2001 is warranted on this count.

Though the quantum of receipts under the head services are less than those declared by the taxpayer in his returns, it has to be noted that all these receipts constitutes payments are Pakistan source of income on which tax has been deducted u/s 153 of the Income Tax Ordinance, 2001. This top cricketer has also been part of various international cricketing ventures such as AsiaXl, Deccan Chargers (India), Fly Emirates XI, Hampshire (England), ICC WorldXI, Melbourne Renegades (Bigbash League, Australia), South Australia (Bigbash League, Australia). These are all sources of lucrative income, for instance he received $ 700,000 for playing the recently concluded Bangladesh Premier League. As a resident individual (in which status returns have also been filed) the top cricketer both Pakistan and foreign sources of income are taxable in Pakistan. Further information collection about all these sources (about which the field formations are sufficiently empowered), could reveal the actual extent of income in the instant case, directorate of intelligence IR added.
Copyright Business Recorder, 2012