In the past two years, more than 10,000 employees of Pakistan’s Federal Board of Revenue (FBR) have been flagged as non-filers of income tax returns.
According to a report published by Dawn, quoting sources, these revelations have raised concerns about the efficacy of efforts to formalise the economy and expand the tax base, especially when the tax authority itself grapples with ensuring its workforce complies with tax regulations in the tax years 2022 and 2023.
The trend of non-filing is notably prevalent among officials below the grade-17 level nationwide. Despite the high incidence, the FBR has yet to take action against these non-compliant employees.
The total workforce of the tax authority stands at 25,000 nationwide, with officers above grade 17 numbering 1,700.
In 2022, the number of non-filers among officers of grade 17 and above was over 500, slightly decreasing to around 300 in 2023. Despite a special extension until December 31, only 1,400 officers in this category have filed their tax returns for 2023, highlighting persistent tax non-compliance among higher-grade officers.
For the tax year 2023, the Inland Revenue Service reported an 88 percent compliance rate among officers, while the customs group officer category showed an 80 percent compliance rate.
The relatively high compliance rate for 2023 is attributed to the special extension granted by the FBR chairman, allowing employees until December 31 to file their returns, in contrast to the standard deadline for common citizens, which expired on October 31.
Among officials below grade 17 across the country, the non-compliance rate for tax return filing ranges from 60 percent to 70 percent. This category comprises approximately 23,300 employees nationwide, with an estimated 10,000 employees being habitual non-filers, according to official estimates.
A recent exercise conducted by the Chief Commissioner of the Regional Tax Office-1 in Karachi revealed that nearly 307 officers failed to file their tax returns for 2022 and 2023. If this exercise were extended to 22 Regional Tax Offices (RTOs), two Corporate Tax Offices (CTOs), and three Large Taxpayer Units (LTUs), the number of non-compliant officials could potentially reach the thousands.
An FBR letter warns that those failing to file returns before December 31 will be subject to penalties. However, the prevailing non-compliance levels within the FBR suggest that these non-compliant officers may contribute to the widening of the country’s narrow tax base.