Tuesday, June 7, 2011

Tax evasion hit 79%,too huge, FBR admits

The Federal Board of Revenue(FBR) admitted on Monday that tax evasion has hit 79 % this year and said it would have to be reduced to achieve the revenue target set for 2011-12.

The tax gap (tax evasion) is the difference between potential and actual tax collection. The potential is the amount of tax the government will collect if everyone fully complies with the tax laws. Briefing reporters on new taxation measures taken in the budget, FBR Chairman Salman Siddique, however, said there was no increase in the tax gap over the past few years.

According to the World Bank study, the tax gap, which was 69 % in the year 2008 has now gone up to 79 % which is alarming situation. But the chairman said as the figure of 69 per cent was calculated by using a different methodology, the two figures were not comparable.

However, he conceded that 79 per cent was the highest-ever figure. At the same time, he said that the tax-to-GDP ratio also has fallen to 9.1 per cent from last year’s 9.2 per cent. He projected the next year’s figure at 9.5 per cent.

He also said that the FBR was focusing on reducing the tax gap. “There is a potential to reduce the evasion percentage to 40 to 50 per cent.”