On Thursday, Finance Minister Muhammad Aurangzeb said that companies evading sales tax were to blame for 50% of the tax leakage that the government had previously estimated to be Rs7 trillion.
Together with FBR Chairman Rashid Langrial, the finance minister addressed a press conference in Islamabad and stated that he wanted to address the “war on tax fraud” by raising the tax-to-GDP ratio to 13 percent.
He stated, “It is crucial that we incorporate you all and have a discussion based on facts.” This is certainly not a 10,00 feet level conversation — this is definitely not a profound conversation.”
According to the finance minister, “has to now be taken evenly to bring tax-to-GDP ratio up so that we can be a sustainable country,” the burden of taxation, which primarily fell on the salaried and manufacturing classes, “has to now be taken evenly.”
The finance minister showed a slide show about tax fraud and said that a “fact-based” discussion was needed to stop tax fraud.
“On the other side, we enter a tax system that is fair and where each sector plays its role.”
He emphasized that income tax evasion was worth Rs1.3 trillion, with a total leakage of close to Rs7 trillion, as previously stated.
He pointed out, “If you see, almost 50 percent of that is sales tax evasion.” Sales tax evasion accounts for roughly half of the 3.4 trillion.
Aurangzeb cited the fact that only 14 percent of businesses were registered as a major factor in the tax fraud.
He emphasized, “Let’s move on to the next category, tax frauds; the first one is misreporting of turnover and input claim.” In order to reduce tax payments, these businesses claim a high input tax ratio.
According to Aurangzeb, businesses issued “fake invoices” for supplies and failed to report the “agency function” where they were required to report that tax to the government.
And that is a significant role that violates your company’s trust and trustee responsibilities, “he added.
The finance minister stated that a number of “big” businesses, including steel, cement, batteries, beverages, and textiles, participated in tax fraud.
He stated, “It is my appeal certainly to the management of these companies that you come to manage these companies that there should be a justification to all stakeholders including what you owe and what the companies owe to the government,” adding that arrests and imprisonment were among the consequences of tax fraud under Section 37-A.
For information on Pakistani and global business, finance, and technology, follow Dawn Business on Twitter, LinkedIn, Instagram, and Facebook.
