Published On: Tue, Nov 21st, 2017

40% Companies of Pakistan did not File Income Tax in 2016

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file income taxIt is has been stated that over 40% companies did not file income tax. This does not show a good picture of tax in Pakistan. It means companies are gaining profits but they are not willing to pay the required tax and did not file income tax.

According to Tax Directory 2016, Pakistan’s top 50 firms paid nearly half of the taxes collected from the corporate sector. This is good progress.

The top 50 companies of Pakistan paid Rs202 billion or nearly 48% of total taxes paid by the corporations. The contribution of top 10 companies was Rs102.5 billion.

The top 10 filer included five commercial banks, three oil firms and one each was from the fertilizer and aviation sectors.

The weak tax collection me be contributed to weak tax laws and enforcement by the Federal Board of Revenue (FBR). The tax laws are also complicated and are hindrance for entrepreneurs.

Furthermore, it was stated that, approximately, 33,000 or 41.3% of the companies that filed tax returns did not pay any kind of income tax.

The Tax Reforms Commission’s report of 2016 said that, “The FBR’s enforcement function at the field level needs to expand manifold and it must regain the trust and confidence of taxpayers which it has nearly lost.”

Habib Bank Limited was the largest corporate sector taxpayer that paid Rs16.47 billion in tax year 2016 followed by MCB Bank that paid Rs16.16 billion. United Bank Limited paid Rs15.3 billion in income tax.

11% of companies and AOPs file income tax up to Rs5 million, however, less than 2,000 companies and AOPs paid up to Rs10 million.

There were only 66 companies that paid more than Rs1 billion in income tax in 2016. The total contribution of these companies was calculated at Rs219 billion.

Another 460 companies and business concerns paid income tax in the range of Rs100 million to Rs1 billion. There were 389 business companies that paid income tax in range of Rs50 million and Rs100 million.

The tax collections need to be improved and a proper policy is needed to enhance the tax base.

About the Author

- Junaid Ashraf has a Master of Philosophy degree in government and public policy. He has international publications through Taylor & Francis, a leading British publishing body. He regularly write columns for newspapers. His interests include international political economy, geopolitics and good governance. He writes for Asia Times.