Excise and taxation department fails to collect tax from Islamabad hotels

ISLAMABAD: A recent report released by the Auditor General of Pakistan uncovered severe negligence by the Excise and Taxation Department Islamabad, exposing substantial losses to the national exchequer.

The report examines the tax collection practices within the capital’s hospitality sector, revealing a trend of mass negligence.

Out of the 120 hotels operating in Islamabad, the Excise and Taxation Department only managed to collect taxes from a meager nine hotels, leaving 111 establishments untaxed. This failure in tax collection from the hospitality industry has resulted in significant revenue losses amounting to billions.

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In the fiscal year (FY) 2022-23, despite the presence of 120 hotels, the department only collected taxes from 9, totaling Rs484,975,847. The report underlines the department’s deficiency in essential data regarding hotel capacities and monthly room rents, complicating the tax assessment process.

The report also reveals a loss of over Rs43.866 million due to the department’s failure to collect General Sales Tax (GST). Under the Sales Tax Act of 1990, a 17 per cent sales tax is mandated on taxable supplies and income earned within Pakistan.

Meanwhile, the Excise and Taxation Department issued vehicle number plates at a rate of Rs800 per plate but neglected to collect the required sales tax from owners, resulting in a loss of Rs43.866 million in revenue for the government.

The Auditor General’s report has recommended the recovery of the aforementioned amount from vehicle owners who were issued number plates without proper sales tax collection. Implementation of this recovery measure would aid in replenishing the government treasury.

The Excise and Taxation Department’s administration, however, remained unresponsive until the audit report was finalised.