Telecom operators have taken action by blocking the mobile SIMs of approximately 9,000 individuals who have not filed their taxes, following directives from the Federal Board of Revenue (FBR).
According to a spokesperson from the FBR, this measure has been expedited, with telecom companies receiving updated data daily for the purpose of blocking SIMs.
It has been revealed that the FBR has already provided data for around 30,000 individuals whose SIMs are earmarked for blocking.
However, the spokesperson acknowledged that there is still a substantial number of approximately 506,671 individuals who have not filed their Income Tax Return for Tax Year 2023 but are obligated to do so.
Initially, telecom operators were hesitant to execute this directive, citing various legal concerns. Nevertheless, they eventually consented to manually block SIMs in smaller batches.
The FBR had issued an Income Tax General Order (ITGO) in late April, instructing the disabling of mobile phone SIMs belonging to over half a million individuals not appearing on the active taxpayer list.
At the time of issuance, telecom companies were directed to furnish a compliance report by May 15 regarding this matter.
The Federal Board of Revenue (FBR) has issued a stern warning to individuals who have not filed their income tax returns, stating that they could face severe consequences, including the suspension of bank accounts and restrictions on both domestic and international travel via motorways and air travel.
Muhammad Asif, Chief of Broadening the Tax Base (BTB), informed the media that the FBR has initiated a comprehensive nationwide survey of businesses and commercial entities to identify non-filers for registration.
Non-filers are urged to register with their nearest tax office promptly to avoid penalties, fines, utility disconnection, and the suspension of bank accounts.
In extreme cases, non-compliance may lead to restrictions on movement on motorways and at airports.
The FBR, through its countrywide field formations, is actively conducting surveys to gather information on businesses and commercial activities, which will be accessible on the official website soon.
According to official documents, despite Pakistan’s population reaching 240 million, only around 5.2 million individuals are registered in the tax system and filed their income returns in 2022.
The country faces significant challenges in its fiscal landscape, marked by widespread tax evasion, a low tax-to-GDP ratio, and a limited number of tax filers, resulting in insufficient funding for essential public services and critical socioeconomic development initiatives.
Recognising the urgency of expanding the tax base to strengthen the nation’s financial foundation, the FBR has launched a nationwide drive targeting eligible individuals and those with taxable income to register with the tax system and file their income returns. The goal for the current year is to add 1.5 million new taxpayers.
The Director of BTB highlighted that the FBR, through third-party data acquisition, has compiled the financial transaction data of hundreds of thousands of individuals not yet in the tax net.
This information is accessible on the FBR’s website under the title “MALOMAAT,” allowing individuals to review their transactions over the past few years.
The FBR emphasises that it possesses data on nearly all eligible individuals for filing income returns, and non-compliance will be addressed within a few weeks.
According to Brecorder, to avoid penalties, fines, utility disconnection, and travel restrictions, individuals are urged to take advantage of the available time, visit their nearest tax office, and register promptly, as stated by Muhammad Asif.
The International Monetary Fund (IMF) is urging Pakistan to intensify efforts towards tax recovery.
Specifically, the IMF calls for increased income tax collection from retailers and the real estate sector, alongside a heightened focus on agriculture income.
The IMF emphasises collaborative actions between the federal government and provinces to enhance tax recovery, considering the imposition of a fixed tax on retailers in case of collection shortfalls after December.
Additionally, the IMF recommends consultations with provinces for taxing agriculture and real estate. Proposals for tax policy amendments and addressing taxation flaws have been extended to the Federal Board of Revenue (FBR) by the IMF mission, emphasising effective taxation policies and enforcement in sectors with insufficient tax recovery.
The FBR has presented a revenue projection report to the IMF team for the current fiscal year, with the IMF expected to respond by Saturday. During the discussions, the FBR briefed the IMF on the task force dedicated to tax policy and administration.
As part of an agreement with the IMF, Pakistan commits to sharing data on tax evaders through collaboration with the FBR, banks, and NADRA, aiming to enhance overall tax collection.
This agreement was reportedly reached during policy review talks, facilitating the release of a $700 million loan tranche under the Standby Agreement (SBA).
The Federal Board of Revenue (FBR) has officially announced that the deadline for income tax return submissions remains unchanged, concluding on September 30.
However, individuals may request an extension of up to 15 days by submitting an application to their respective commissioner.
FBR officials report that over 1.7 million tax returns have already been filed, with expectations of the total reaching over Rs2 million by the September 30 deadline.
The Federal Board of Revenue (FBR) has announced important amendments to the Income Tax Ordinance, 2001 through Finance Act 2023, bringing significant changes to the Super Tax structure. According to the latest income tax circular (2 of 2023), banks will now be required to pay a 10 per cent Super Tax if their income exceeds Rs300 million.
The Super Tax was initially introduced through the Finance Act of 2022, imposing graduated tax rates ranging from 1 per cent to 4 per cent on income slabs starting from Rs150 million to Rs300 million and above. Certain specified business sectors were subject to a higher Super Tax rate of 10 per cent if their income surpassed Rs300 million.
New Super Tax slabs
To enhance the scope of the Super Tax and ensure progressivity and uniformity in the tax rate structure, the Finance Act 2023 has introduced additional income slabs. These new slabs are as follows: Rs350 million to Rs400 million, Rs400 million to Rs500 million, and Rs500 million and above, with corresponding Super Tax rates of 6 per cent, 8 per cent, and 10 per cent, respectively. These new Super Tax rates will apply to all taxpayers across the board for the Tax Year 2023 and beyond.
Addressing a significant concern, the Finance Act 2023 has also clarified the payment procedure for the Super Tax. The ambiguity surrounding whether the Super Tax under section 4C of the Ordinance should be paid as a lump sum at the time of filing income tax returns or in monthly/quarterly installments of advance tax under section 147 of the Ordinance has been resolved.
The introduction of a new sub-section (5A) in section 4C now requires Super Tax liability to be paid in conjunction with monthly/quarterly advance tax installments, depending on the taxpayer’s circumstances. Corresponding amendments have been made in section 147 of the Ordinance to facilitate this process.
This move is aimed at broadening the scope of the Super Tax and making it a more progressive and comprehensive tax measure. The FBR expects these changes to contribute significantly to the country’s revenue collection efforts while ensuring a fair and equitable tax system for all taxpayers.
In the fiscal year 2022-23, Pakistan’s salaried class emerged as the leading contributor to the nation’s income tax, making a substantial contribution of Rs264.3 billion. Astonishingly, this amount was nearly 200 per cent higher than the combined income tax paid by the country’s exporters and largely undertaxed retailers.
Data collected and released by the Federal Board of Revenue (FBR) unveiled that salaried individuals paid a total of Rs264.3 billion in taxes during the fiscal year, marking an impressive increase of over Rs75 billion or 40 per cent compared to the previous year. This rise was attributed to the imposition of up to a 35 per cent tax rate on their earnings.
Ranked as the fourth-largest contributor to withholding taxes, following contractors, bank depositors, and importers, the salaried class has faced increased taxation in the latest budget. Despite grappling with this added burden alongside historically high inflation rates, the government once again raised taxes on salaried individuals earning more than Rs200,000 per month in the recent budget. In a surprising move, around 5,000 retailers were relieved from stricter registration conditions.
It is noteworthy that during the preceding fiscal year, the FBR managed to collect over Rs2 trillion through withholding taxes, accounting for 61 per cent of the total income tax generated in the same period. However, concerns were raised over the ease of collecting withholding taxes, especially from non-filers at double rates, which has become a reliable revenue source for the FBR.
The Salaried Class Alliance expressed apprehension over the prioritisation of additional taxation on existing taxpayers while allowing the informal sector to thrive. The highest income tax collections came from contractors, savings account holders, importers, salaried individuals, non-filers’ electricity bills, telephone & mobile phone users, and dividend income. According to Express Tribune, other significant contributors included taxes on property transactions, exports, foreign income fees, brokerage commissions, and car registrations.
Comparatively, provisional figures revealed that exporters and retailers combined paid Rs175 billion less in taxes compared to the salaried class. Despite earning $27.7 billion during the last fiscal year, exporters contributed only Rs74 billion in taxes. Although their tax contribution increased by 17.4 per cent from the previous year, it did not match the rise in their income in rupee terms. Retailers, subject to a 0.5 per cent advance tax on sales, contributed a mere Rs15.6 billion, reflecting the lowest contribution among income groups. Surprisingly, despite accounting for approximately 19 per cent of the economy, retailers and wholesalers only contributed 0.4 per cent to the total income tax collection.
The approach of the International Monetary Fund (IMF) came under criticism for disproportionately burdening the salaried class, which lacks representation in the corridors of power, unlike exporters and retailers.
Lastly, tax collection from contractors and service providers reached an impressive Rs391 billion in the last fiscal year, marking the largest single-income tax collection head over which the FBR has no control. Additionally, profits on debt witnessed a remarkable 106 per cent increase, amounting to Rs320 billion, reflecting higher interest rates and increased savings. Importers also contributed significantly, paying Rs290 billion in income tax on various types of imports, ranking as the third-largest contributor to withholding taxes.
Finance Minister Ishaq Dar presented a comprehensive budget proposal of Rs14.46 trillion for the fiscal year 2023-24, emphasising an expansionary approach. One of the key highlights of the proposal was a substantial increase in the salaries of government employees, aimed at providing much-needed relief.
In order to ensure that the burden on the salaried class remained unchanged, the coalition government decided not to make any alterations to the existing tax slabs, which were approved in the previous year’s Finance Bill of 2022.
Outlined below are the tax slabs for different income brackets:
1. Income below Rs600,000 per year (Rs50,000 per month):
– No tax will be deducted.
2. Income between Rs600,000 to Rs1.2 million per year (Rs50,000 to Rs100,000 per month):
– Tax will be levied at a rate of 2.5 per cent on the amount exceeding Rs600,000.
3. Income between Rs1.2 million to Rs2.4 million per year (Rs100,000 to Rs200,000 per month):
– Tax will be levied at a rate of Rs15,000 plus 12.5 per cent on the amount exceeding Rs1.2 million.
4. Income between Rs2.4 million to Rs3.6 million per year (Rs200,000 to Rs300,000 per month):
– Tax will be levied at a rate of Rs165,000 plus 20 per cent on the amount exceeding Rs2.4 million.
5. Income between Rs3.6 million to Rs6 million per year (Rs300,000 to Rs500,000 per month):
– Tax will be levied at a rate of Rs405,000 plus 25 per cent on the amount exceeding Rs3.6 million.
6. Income between Rs6 million to Rs12 million per year (Rs500,000 to 1,000,000 per month):
– Tax will be levied at a rate of Rs1.005 million plus 32.5 per cent on the amount exceeding Rs6 million.
7. Income exceeding Rs12 million per year (exceeding Rs1,000,000 per month):
– Tax will be levied at a rate of Rs2.955 million plus 35 per cent on the amount exceeding Rs12 million.
These tax slabs have been carefully designed to ensure a fair and balanced approach to income taxation, considering various income brackets. By maintaining consistency with the previous year’s tax slabs, the government aims to alleviate the burden on the salaried class while still generating the necessary revenue for public welfare and development initiatives.
Overall, the budget proposal presented by Finance Minister Ishaq Dar reflects the government’s commitment to supporting government employees and maintaining a progressive tax system that promotes economic growth and fairness.
Tax slabs
Annual income
Monthly income
Tax rate
Slab 1
Below Rs600,000
Below Rs50,000
No tax deducted
Slab 2
Rs600,000 – Rs1.2 million
Rs50,000 – Rs100,000
2.5 per cent of the amount exceeding Rs600,000
Slab 3
Rs1.2 million – Rs2.4 million
Rs100,000 – Rs200,000
Rs15,000 + 12.5 per cent of the amount exceeding Rs1.2 million
Slab 4
Rs2.4 million – Rs3.6 million
Rs200,000 – Rs300,000
Rs165,000 + 20 per cent of the amount exceeding Rs2.4 million
Slab 5
Rs3.6 million – Rs6 million
Rs300,000 – Rs500,000
Rs405,000 + 25 per cent of the amount exceeding Rs3.6 million
Slab 6
Rs6 million – Rs12 million
Rs500,000 – Rs1,000,000
Rs1.005 million + 32.5 per cent of the amount exceeding Rs6 million
Slab 7
Above Rs12 million
Above Rs1,000,000
Rs2.955 million + 35 per cent of the amount exceeding Rs12 million
In order to enhance the cost of non-filers and generate additional income in the second quarter (October-December) 2022–2023, the Federal Board of Revenue (FBR) has decided to carefully monitor budgetary measures established under the Finance Act 2022.
The higher cost to non-filers was one of the budget’s driving concepts (for the years 2022-23), sources told Business Recorder. For those who don’t submit income tax returns, the withholding tax rates have increased significantly.
The last budget included new steps in this regard (2022-23). The remainder of the current fiscal year must see some measures completely implemented, though. All procedures put in place for individuals who do not appear on the FBR’s list of active taxpayers are tightly under the FBR’s vigilance.
For instance, the government raised the tax rate for people who don’t pay taxes regularly from 100 per cent to 250 per cent when they buy property. Similar to this, the tax rate on the acquisition of a motor vehicle by a person who is not an active taxpayer has increased from 100 per cent to 200 per cent. The financial impact of raising the advance tax rate for non-ATL individuals who purchase real estate from the current 2 per cent to 5 per cent is Rs20 billion.
The Excise and Taxation authorities currently collect advance tax on passenger transport vehicles operating for hire based on the vehicle’s seating capacity. By substituting the Table in the manner described below, the rates of adjustable advance tax on such vehicles stipulated in Division III of Part IV of the First Schedule of the Ordinance have been increased. According to rule 1 of the Tenth Schedule to the Income Tax Ordinance, the tax rate has been increased by 100 per cent in cases where a person’s name does not appear on the Active Taxpayers List.
The rate of tax to be collected under section 236K will rise by 250 per cent of the rate indicated in Division XVIII of Part IV of the First Schedule in the case of a purchaser of immovable property who is not listed on the Active Taxpayers List. Rule 1 of the Income Tax Ordinance’s Tenth Schedule has been updated as necessary.
The provision 236Y has been reinserted by Finance Act 2022. When sending money outside of Pakistan on behalf of a person who has completed a credit card, debit card, or prepaid card transaction with a person outside of Pakistan, every banking company will collect this adjustable advance tax. In the case of individuals who are not on the Active Taxpayers List, the rate will increase by 100 per cent.
The advance tax on motor vehicles that is collectible under this section will increase by 200 per cent in the event that a person does not appear in ATL. Rule 1 of the Income Tax Ordinance’s Tenth Schedule has been updated as necessary.
The Federal Board of Revenue (FBR) has managed to reach its four-month target of Rs2.14 trillion despite poor performance in increasing the tax base because of a 34 per cent decrease in income tax returns filed.
Ishaq Dar, the finance minister, was forced to once again push the deadline for filing returns due to the dismal results in increasing the tax base. The new deadline is November 30; within this time, FBR must receive an additional Rs1.3 million in returns only to match the amount from the previous year.
The FBR collected Rs2.148 trillion in taxes, as opposed to the objective of Rs2.143 trillion set for the period of July to October, according to FBR officials. Tax revenue increased by 16 per cent, or Rs305 billion, as compared to the same period in the previous fiscal year.
This increase was slower than the 23 per cent inflation rate that was in effect at the time. but adequate for the first four months of the fiscal year to keep the tax department on pace.
According to Express Tribune, the FBR had taken in Rs1.84 trillion in tax revenue during the first four months of the previous fiscal year. The economy’s slowdown, however, makes it appear as though the FBR may fall short of its tax goals for the upcoming months.
A decrease in imports was the main reason the FBR could not meet its monthly tax goal of Rs 534 billion, which it missed by Rs 22 billion. Although there was a 15 per cent increase in revenue over the Rs445 billion collected in October of last year, the monthly goal was not met.
The Inland Revenue Service (IRS) exceeded its July–October goal, largely mitigating the effects of the Customs Department’s low collection rate.
As long as less than 2.5 million people file income tax returns, the tax system will not be able to increase the tax base, which has shrunk by 34 per cent during the previous tax year. Up to Rs3.8 million worth of returns have been submitted for the 2021 tax year.
By extending the tax base to include traders, Pakistan had promised the International Monetary Fund (IMF) that it would increase the tax base by a minimum of 700,000. Instead, it is approximately Rs1.3 million below the total from the prior year. The FBR’s base really falls two million short of its own conservative goal.
In order to ensure the prompt resolution of all disciplinary cases and inquiries against tax employees engaged in corruption and dishonest activities in field formations, the Federal Board of Revenue (FBR) established a new Section on Friday called “Discipline/Inquiries.”
A new Section with the nomenclature “Discipline/Inquiries” is hereby created in the Admn/HR Wing, FBR (HQ), Islamabad with immediate effect in order to ensure proper follow-up of all disciplinary cases/inquiries of officers (BS-16 and above) of FBR (HQ) and IR field formations with a view to ensuring timely disposal of such cases, according to an office order issued by the FBR on Friday.
According to Brecoder, a secretary or second secretary who works for the specified Section will be in charge and reporting to the Chief (HRM-IR), FBR.
The FBR has also been ordered by Prime Minister Shehbaz Sharif to fully abide by the guidelines of the Civil Servants (Efficiency and Discipline) Rules, 2020 when taking disciplinary action and conducting investigations against dishonest tax officers.
The FBR chairman has directed the Revenue Division/FBR to rigorously adhere to the following instructions in all disciplinary processes and inquiries launched against the officers, in accordance with the directives of the prime minister:
The Civil Servants (Efficiency & Discipline) Rules, 2020, Rule 10 read with Rule 12 shall govern how the chosen inquiry officer would conduct the inquiry processes. The same must be finished within sixty (60) days of the date the inquiry order was issued, or within any further time the authority may provide.
All Directors General, Chief Commissioners, Chief Collectors, Commissioners, and Collectors of FBR shall keep the relevant case record in safe custody while forwarding the recommendation to begin disciplinary proceedings against any officer(s) or official in order to ensure safe custody of the record in an inquiry.
In accordance with the guidelines outlined in Rule 8 of the Civil Servants (Efficiency and Discipline) Rules, 2020, all heads of field offices shall also see to it that pertinent records of the case and other related documents are timely provided to the inquiry officer or the inquiry committee, as the case may be, through the designated departmental representative (DR). This must be done within seven days of the date of the inquiry order.
