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A system that breeds fraud
A system that breeds fraud

Business Recorder

time7 hours ago

  • Business
  • Business Recorder

A system that breeds fraud

EDITORIAL: In his briefing to the National Assembly's Public Accounts Committee recently, FBR (Federal Board of Revenue) Chairman Rashid Langrial not only acknowledged that the potential volume of tax fraud in Pakistan could be as high as Rs700 billion, with sales tax fraud posing a particularly knotty challenge, he also conceded that its complete elimination remains unlikely. This is, in effect, an admission that there is something inherently wrong with the country's tax administration and overall taxation structure. While the FBR chairman readily owned up to the challenge posed by tax fraud and evasion, there remains within the tax bureaucracy a stubborn refusal to honestly reckon with the root causes of the country's dismal tax compliance. Firstly, there is a need to recognise that such huge levels of tax evasion cannot exist without the incompetence, and in too many cases, outright connivance of those manning the tax bureaucracy. But even more fundamentally, there is the structurally problematic over reliance on excessively high tax rates — rates that are not only steep but subject to frequent and accelerating increases — eroding public trust in and compliance with the system. For large segments of the economy, paying taxes at prevailing high rates has become substantially costlier than bearing the cost for evading them, yet the tax bureaucracy remains unwilling to confront the glaringly obvious truth: the higher the tax rate, the greater the temptation for evasion. The costs of evasion, such as bribing tax officials, are often significantly lower than the burden of full tax compliance in an environment of high rates. The chairman highlights sales tax fraud, yet in a country where the standard sales tax rate is 18 percent, and even higher in some cases, such high rates practically invite evasion. Anyone with even a basic grasp on tax policy can see then that the most effective way to broaden the tax net would be through lowering tax rates, but that understanding remains inexecutable in the absence of political will to tax all incomes irrespective of origin. Then there is the problem posed by a tax structure dependent on minimum tax on turnover, which is inherently punitive towards compliant taxpayers. Under this regime, even if an entity has incurred a loss and so certified by audit, it must still pay the legally mandated minimum tax on its revenue. How such a policy encourages businesses to join the tax net remains a mystery, as loss-making enterprises can easily be driven out of operation under this punishing framework, especially since Pakistani companies have to pay a minimum tax ranging from 0.5 to eight percent on turnover, irrespective of profitability. Essentially, this system penalises businesses for entering the tax net and for fully adhering to tax laws, while also undermining investment and suppressing broader economic activity. Added to this are the complications caused by high withholding tax rates. Not only do these remain exorbitant, but claiming and actually receiving refunds has become an increasingly onerous process. In many cases, businesses and individuals are unable to recover their dues without resorting to paying 'speed money' to relevant officials, creating yet another reason to simply stay out of the tax ambit than to expend effort and resources on documenting receipts, invoices and financial records for countless transactions only to be denied the full refund that is ultimately owed. We thus find ourselves trapped in a vicious, never-ending cycle. Multiple studies have highlighted the enormous cost of complying with Pakistan's complex and punitive tax system. A recent ADB study, for instance, clearly demonstrates the link between high rates, high compliance costs and increased tax evasion. Yet, judging by the prevailing attitude within the tax bureaucracy, there seems little hope that these legitimate concerns will be meaningfully addressed. Copyright Business Recorder, 2025

Three men damage 15 vehicles with stones & sticks in Dhankawdi
Three men damage 15 vehicles with stones & sticks in Dhankawdi

Time of India

time13 hours ago

  • Time of India

Three men damage 15 vehicles with stones & sticks in Dhankawdi

1 2 Pune: Three men damaged 18 vehicles — 15 autorickshaws, two cars and a school van — with stones and sticks between 12.35am and 1am on Wednesday at Dhankawdi, and threatened residents with dire consequences if anyone intervened in their act of vandalism, claiming themselves to be local "Bhais" (strongmen). Sumit Rangnekar (42), a resident of the area, lodged a complaint with the Sahakarnagar police later in the morning. The trio damaged the windshield of his car. Deputy commissioner of police (Zone II) Milind Mohite told TOI, "The reason behind the vandalism is not known yet. Our team is studying the CCTV footage of the area, which shows the three men riding on a motorcycle and damaging the vehicles parked on a road. They have been riding triple-seat." You Can Also Check: Pune AQI | Weather in Pune | Bank Holidays in Pune | Public Holidays in Pune Inspector Surekha Chavan of the Sahakarnagar police said, "The three men damaged the vehicles parked on the public road. A majority of the affected people are autorickshaw drivers, who stay nearby." An autorickshaw driver (48) said, "I had parked my autorickshaw on the road around 10.30pm on Tuesday. After parking my autorickshaw, I went home. I received a call from one of my friends around 1am, stating that someone damaged the windshield of my autorickshaw." by Taboola by Taboola Sponsored Links Sponsored Links Promoted Links Promoted Links You May Like Villa Prices in Dubai Might Be Lower Than You Think! Villa for sale in Dubai | Search Ads Learn More Undo He said, "Now, to repair the windshield, I will have to spend around Rs2,000. I also will miss two days' income, which is around Rs600 to Rs700 per day." DCP Mohite said, "We suspect that the case of vehicle vandalism is connected to another case of house ransacking in the area. A man celebrated his birthday with his second wife and two sons, and three sons of his earlier wife came to his house and ransacked it. The three men were seen leaving the same area on their motorcycle where the ransacked house is located. We are yet to arrive at any conclusion, though." Late on Sunday night, a gang of eight men damaged a grocery store and then damaged an autorickshaw. On Saturday evening, three people damaged eight vehicles in Kondhwa over an old rivalry.

Pakistan facing over Rs700bn tax fraud, NA's PAC body told
Pakistan facing over Rs700bn tax fraud, NA's PAC body told

Business Recorder

time6 days ago

  • Business
  • Business Recorder

Pakistan facing over Rs700bn tax fraud, NA's PAC body told

ISLAMABAD: The Federal Bureau of Revenue (FBR) Chief Rashid Langrial on Thursday said Pakistan is facing tax fraud of worth over Rs700 billion. Briefing the sub-committee of NA's Public Accounts Committee (PAC), FBR chief said that sales tax fraud in Pakistan is alarmingly higher than in other countries. He estimated the potential volume of tax fraud at over Rs 700 billion, emphasizing that despite improvements in the system, the complete elimination of sales tax fraud remains unlikely. Finance Act expands definition of tax fraud He noted that Pakistan's current level of tax evasion has escalated significantly, though some success has been achieved in partially controlling sales tax-related fraud. The FBR chairman further stressed the need to enhance post-audit mechanisms and enforce strict penalties to curb the issuance of fake invoices. He also revealed that Rs200 billion were recovered during the last fiscal year following the clearance of tax litigation cases in courts. Langrial added that FBR has been granted powers to control tax fraud and recover dues from fraudulent cases. However, he cautioned that the recurring release of arrested tax evaders undermines deterrence and will not effectively prevent future fraud.

Country facing over Rs700bn tax fraud, NA's PAC body told
Country facing over Rs700bn tax fraud, NA's PAC body told

Business Recorder

time6 days ago

  • Business
  • Business Recorder

Country facing over Rs700bn tax fraud, NA's PAC body told

ISLAMABAD: The Federal Bureau of Revenue (FBR) Chief Rashid Langrial on Thursday said Pakistan is facing tax fraud of worth over Rs700 billion. Briefing the sub-committee of NA's Public Accounts Committee (PAC), FBR chief said that sales tax fraud in Pakistan is alarmingly higher than in other countries. He estimated the potential volume of tax fraud at over Rs 700 billion, emphasizing that despite improvements in the system, the complete elimination of sales tax fraud remains unlikely. Finance Act expands definition of tax fraud He noted that Pakistan's current level of tax evasion has escalated significantly, though some success has been achieved in partially controlling sales tax-related fraud. The FBR chairman further stressed the need to enhance post-audit mechanisms and enforce strict penalties to curb the issuance of fake invoices. He also revealed that Rs200 billion were recovered during the last fiscal year following the clearance of tax litigation cases in courts. Langrial added that FBR has been granted powers to control tax fraud and recover dues from fraudulent cases. However, he cautioned that the recurring release of arrested tax evaders undermines deterrence and will not effectively prevent future fraud.

Gold dips slightly, rupee inches up
Gold dips slightly, rupee inches up

Express Tribune

time16-07-2025

  • Business
  • Express Tribune

Gold dips slightly, rupee inches up

Listen to article Gold prices in Pakistan fell on Tuesday, mirroring a downturn in the international market as investors reacted cautiously to fresh US inflation data and awaited clarity on potential trade tariffs. According to the All Pakistan Sarafa Gems and Jewellers Association, the price of gold declined by Rs700 per tola, settling at Rs359,000. Similarly, the rate for 10 grams dropped by Rs600 to Rs307,784. The price per tola experienced a dip after an increase the previous day, when it surged by Rs1,600 to reach Rs359,700. Internationally, gold inched lower as the US Consumer Price Index (CPI) data showed a 0.1% uptick in inflation for June, in line with expectations but still keeping interest rate cut hopes subdued. Investors also remained wary of potential tariff announcements amid renewed trade rhetoric from US President Donald Trump. Spot gold fell 0.2% to $3,336.99 per ounce by 0940 am EDT (1340 GMT). US gold futures were down 0.4% to $3,345. The US dollar ticked up 0.2%, making gold more expensive for holders of other currencies. "I think the market continues to be focused on tariffs, keeping gold underpinned. I remain bullish on gold, even though we're well within the range that has been in place since the middle of May," said Peter Grant, Vice President and Senior Metals Strategist at Zaner Metals. "The market isn't slow – it's just moderate," Adnan Agar, Director at Interactive Commodities, told The Express Tribune. "Activity has been consistent over the past three to four days," he noted. "Today's (Tuesday's) high was $3,366 and we're trading near the day's low at $3,334." Agar attributed the dip to inflation data, which reduced the likelihood of an early interest rate cut by the US Federal Reserve. "With inflation edging up, the probability of a rate cut has now shifted further out – possibly to September 2025," he said. He added that the ongoing uncertainty around US tariff policy could continue to influence the market over the coming months. "If gold dips further, possibly to the $2,800-3,000 range, it will present a buying opportunity. In the long term, gold remains on an upward trajectory – perhaps by the end of this year or into next." Meanwhile, the Pakistani rupee recorded a marginal appreciation against the US dollar on Tuesday, appreciating by 0.02% in the inter-bank market. By the end of the trading session, the rupee closed at 284.67, up by five paisa from the previous day's close at 284.72. The US dollar remained near a three-week high against major global currencies as investors looked ahead to key US inflation data expected later in the day, which could offer insights into the future course of monetary policy.

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