Karachi, January 5, 2024 – The annual performance report of the Federal Board of Revenue (FBR) for the tax year 2023 has revealed a bleak picture, indicating only a one percent recovery out of the total demand created through audits.
The apex tax collecting agency of Pakistan generated a demand of Rs 47.8 billion in audit cases pertaining to income tax and sales tax. Shockingly, the FBR managed to recover only Rs 529 million during the entire fiscal year.
The detailed evaluation of the performance reports concerning audit cases under Section 214 C of the Income Tax Ordinance, 2001 and Section 72B of the Sales Tax Act, 1990 during the fiscal year 2022-23 sheds light on the challenging landscape faced by the FBR.
In the case of income tax audits, the data shows that the opening balance of audit cases in July 2022 was 8,904, with a cumulative addition of 1,952 cases during the fiscal year. However, the number of cases finalized during this period was 4,313, leaving a pending demand of 3,420 cases. The total demand created amounted to Rs 39.26 billion, of which only Rs 440.16 million was collected.
Similarly, for sales tax audits, the opening balance of cases in July 2022 stood at 2,240, with an addition of 246 cases during the fiscal year. The finalized cases totaled 712, leaving a pending demand for 1,350 cases. The demand created in sales tax cases reached Rs 8.54 billion, with a meager collection of Rs 89.25 million.
The data suggests that the FBR faced challenges in efficiently finalizing audit cases, with a significant number of cases pending resolution. The low recovery percentage in both income tax and sales tax cases indicates a need for enhanced efficiency and strategies to bridge the gap between demand creation and actual recovery.
Analysts and tax experts express concern over the implications of such a low recovery rate, emphasizing the importance of improving the audit and recovery processes within the FBR. Addressing these challenges becomes crucial not only for achieving revenue targets but also for maintaining the integrity and effectiveness of the taxation system in Pakistan.
The FBR is likely to face increased scrutiny and calls for reforms in the coming months, with stakeholders urging the adoption of measures to streamline audit processes, enhance transparency, and ensure a more robust mechanism for recovering outstanding taxes. The figures underscore the necessity for comprehensive reforms within the FBR to enhance its efficiency and strengthen its role in revenue generation for the country.
