Over Half of Companies Filed Returns Without Assistance of Tax Consultants: Survey

The Taxpayers’ Satisfaction Survey (2023) of the Federal Board of Revenue (FBR) revealed a strange result 53 percent of businesses and companies filed their annual income tax returns without any help from external accountants/chartered accountants or tax lawyers.

The survey results further revealed that most of the businesses and trade refrained from responding to the question about the experience of their interaction with the FBR.

The Taxpayers’ Satisfaction Survey was conducted for the Federal Board of Revenue (FBR) with two primary objectives: Firstly, conduct a taxpayer satisfaction survey on Federal Board of Revenue services and products in the inland revenue services. Secondly, generate insights on how to further improve the quality of service and product provided by the inland revenue services to taxpayers. The focus of this survey was on businesses, and thus, the sample included

  1. sole proprietors,
  2. association of partnerships (AOP),
  3. private limited companies, and
  4. public limited companies.

The survey sample targeted two major taxpayer groups: i) businesses which were members of the Pakistan Business Council (PBC) and ii) businesses that were members of Chambers of Commerce in Islamabad, Karachi, and Lahore. A total of 550 firms were surveyed from both these groups based on membership listings across the three cities. This sample size was sufficient to cover all four business types comprising sole proprietors, AOPs, private limited companies, and public limited companies.

Note that 10 percent of the sample included women-owned/represented companies. Of the 550 firms which were surveyed, 516 were confirmed to be registered taxpayers. Hence, the valid responses considered for this exercise were based on these 516 businesses. A breakdown of these businesses is shown below, demonstrating a geographical spread.

Surveyed businesses in Islamabad, Lahore, and Karachi belonged to a variety of economic sectors. Of these, 141 (27 percent) businesses operating in the manufacturing sector, are mostly comprised of private and public limited companies. This was followed by 123 (24 percent) businesses operating in wholesale and retail trade and 59 (11 percent) businesses that classified themselves under the hotels and restaurants category.

Sampled businesses also included those engaged in construction (50 businesses), transport and communication (34 businesses), and real estate and business activities (32 businesses). Note that out of the 58 businesses which were women-owned or led, most (32 businesses) of them operated in wholesale and retail trade followed by manufacturing (11 businesses).

As per the survey results the businesses were asked about various aspects of the tax return filing process. This commenced by inquiring who completes and files the tax form return for the business and it was observed that 53 percent of businesses completed the form internally (by the owner or internal account or finance personnel) while 47 percent of businesses obtained assistance externally, primarily from an external accountant/chartered account or tax lawyer.

Amongst the businesses which completed the tax form internally, 41 percent of them found the tax form to be easy while 9 percent stated it was very easy. Around 35 percent of firms found this to be moderate, while 13 percent cited difficulty. On the other hand, those businesses which sought external assistance noted that this was mainly due to convenience (38 percent) and time (24 percent), followed by ensuring that the form is completed by a tax expert (20 percent) or not having the understanding within the business (11 percent).

An important section of the survey was to assess the interaction experience of businesses with the FBR. Businesses were asked whether they had ever interacted with the FBR, and 198 (38 percent) businesses from all segments confirmed that they had done so. On the other hand, 54 percent of surveyed businesses stated that they had not ever interacted with the FBR.

The main reason for not interacting with the FBR was that businesses felt that they did not need to (206 out of 281); 42 businesses chose not to respond and 43 stated that they did not know. Amongst those businesses which did interact with the FBR, the leading method of communicating was in person at FBR office/Regional Tax Office, stated by 180 businesses (93 percent).

19 percent also indicated that they communicated with the FBR via telephone, but this was often subsequent to having met an FBR representative in person (as was the case of e-mail). Around 8 percent of businesses engaged with FBR personnel at locally set-up facilitation camps. These findings demonstrate that the main interacting channel is in person, while other methods are utilized during follow-up communication once a point of contact has been established. There is also a lower level of awareness of these other forms of communication.

When inquiring about the experience of their interaction, responses were gauged based on a set of factors which included: timeliness of response; treatment by FBR personnel; clarity of information provided; resolution to issue, and recommendation to use this channel. The first point to note is that not all businesses which confirmed interaction with FBR chose to provide feedback on their experience.

For instance, of the 180 businesses which interacted with the FBR in person at the FBR office/RTO—the leading method of interaction by surveyed businesses—only 115 businesses chose to provide feedback on their experience. Hence, when probing deeper into interaction experience, a considerable proportion of businesses refrained from providing feedback.

The number of businesses providing feedback on other forms of interaction is quite low, and hence, responses are analyzed with caution. Therefore, while the sample of responses related to in-person visits at the FBR office/RTO is sufficient, feedback related to other forms of interaction should be viewed as a broad indication.

The survey recommended that the FBR website is a rich resource and gateway to information on FBR’s products and services. While the majority of surveyed businesses had accessed the website and found the content useful, it was observed that the ability to navigate the website could be further improved. Moreover, website content needs to be made more accessible for non-users, such as those falling in the sole proprietorship category, through the better placement of relevant content. Similarly, while businesses indicated improvement in the IRIS portal in recent years, survey scores related to its ease of navigating exhibit room for further improvement.

Customized facilitating measures to encourage/facilitate tax return filing and compliance Taxpayer facilitation programs should be designed to meet specific needs of business taxpayer segments (i.e. sole proprietors, AOPs, private limited and public companies) – beyond current segmentation based on businesses’ revenue volume.

Findings suggest that businesses have differing needs, such as more basic assistance required amongst sole proprietors related to tax return filing to more complex tax matters amongst public limited companies. Moreover, women-led businesses highlighted a greater need than male-led businesses for facilitation in the process of tax return filing. Customized facilitation programs can increase accessibility and interaction with FBR, thereby, improving taxpayer understanding and encouraging tax compliance.

Measures such as dedicated help desks at RTOs, dedicated telephonic and email services, and outreach activities focused on particular business segments or women-led businesses with coordination from business chambers and sector associations may be considered. Once developed, equally important will be to appropriately advertise these facilitation programs to the respective target audiences.

Findings from the survey substantiate the need for an effective communications strategy to enhance facilitation and taxpayer education and promote the institution’s credibility through transparency, the FBR survey added.

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