TAX NEWS - June 2010

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Pakistan Tax: FBR starts drive against companies not filing tax returns

The Federal Board of Revenue (FBR) has initiated a drive against private limited companies, which are registered with Securities and Exchange Commission of Pakistan (SECP), but not complying with their tax liabilities.

The Regional Tax Office (RTO) Karachi, a revenue-collecting wing of the FBR, has identified over 10,000 corporate entities that are not filing annual returns."A process of issuing notices to these entities has been started and will be completed by end-June," said a senior official, requesting anonymity.

RTO data made available to The News shows that over 15,000 private limited companies in Karachi are registered with the SECP, in which around 10,000 entities obtained National Tax Numbers (NTN) from the department. "Only 4,800 corporate returns were filed with the department during the current fiscal year," the official said.

"Initially, notices are being sent for tax assessment. If the entities do not respond, legal action will be initiated against them," the official added.The proposed amendments to Income Tax Ordinance, 2001 through Finance Bill 2010 suggested penalties where any person fails to furnish a return of income, including fines.

The official said that scrutiny of filed returns by 4,800 corporate taxpayers has also been initiated because the tax return fell by 21 percent to Rs1.97 billion during July-May FY10 from Rs2.487 billion over the corresponding period of last fiscal.

In order to broaden the tax base, the FBR is identifying venues but so far failed to achieve this. The total income tax population of the country is only around 2.5 million in which 1.8 million are salaried person.

At the national level the total return filers in the corporate sector were 19,910 during FY10 against the SECP registered corporate entities of 50,952, according to FBR second quarter FY10 report.

The tax managers have advised the FBR that poor compliance of 39 percent on part of the corporate taxpayers could be improved by nabbing 31,000 corporate non-filers registered with SECP.

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