Tag: tax compliance

  • Prime Minister Shehbaz Sharif targets tax evasion amid rising public criticism

    Prime Minister Shehbaz Sharif targets tax evasion amid rising public criticism

    Prime Minister Shehbaz Sharif has instructed relevant authorities to take action against tax defaulters, evaders, and any party that is facilitating them, according to a report by Dawn News. 

    The prime minister was briefed by the finance ministry regarding the country’s economy and a recent high-profile meeting with the International Monetary Fund (IMF). Shehbaz Sharif’s meeting with the finance ministry was reportedly attended by several important ministers, including Muhammad Aurangzeb, Ahad Cheema, Attaullah Tarar, Dr. Mussadik Malik, and PM’s coordinator Rana Ahsan Afzal, among many others.

    In his meeting with the finance ministry, Sharif emphasised the importance of holding tax evaders accountable – as compliance with tax laws will “play a role in the national progress”. He stressed the link between economic growth and tax compliance: An issue Pakistan has always struggled with.

    The severity of non-compliance can be noted by the FBR’s goal to collect at least 10 billion rupees from traders. However, the government failed to meet this target by almost one million per cent – which is an alarmingly large gap between the objective and collection. This is because the FBR was only able to collect a measly one million rupees from traders due to compliance issues.

    Despite these setbacks, Mr Sharif noted that the economy was showing signs of stability, which was highlighted by the booming stock market. He attributed this revival of the economy to government measures, which he claimed have also increased levels of foreign investment.

    Aside from matters of taxation, the finance ministry also outlined the steps that are already being taken to curb tax evasion and punish those involved in facilitating such practices. Moreover, the meeting also included a briefing on economic indicators and inflation, to which Mr Sharif expressed great satisfaction.

    This is because, in just the past year, the inflation rate has plummeted from an uneasy 38 per cent to a more acceptable seven per cent. Moreover, the interest rate has also fallen from 22% to 15%, which spells great news for businesses and unemployed individuals as the expansion of businesses will create job opportunities.

    In the meeting, Mr Sharif stressed how providing relief to the public remains a top priority, stating that all available measures are being employed to honour public commitments. Despite these efforts, PM Shehbaz’s popularity has been challenged by public criticism over high taxes on energy, which have significantly raised energy costs.

    While many Pakistanis simply view the existing tax levels as burdensome, it is important to note that Sharif’s focus on enforcement regarding tax inequalities is impartial, as tax evaders of any kind are not to be shown any leniency regardless of their background.

  • Retailers dodging the tax system could face Rs500,000 fine per ‘non-certified receipt’

    Retailers dodging the tax system could face Rs500,000 fine per ‘non-certified receipt’

    The Federal Board of Revenue (FBR) is considering slapping heavy fines on major retailers who are dodging the tax system by issuing “non-certified receipts” to customers.

    The tax authority is reportedly planning to fine Tier-1 retailers who are not reporting sales tax correctly to the FBR.

    According to details, the FBR will impose a heavy fine of Rs500,000 per incorrect receipt on the retailer. On the other hand, the FBR will reward consumers who report a non-certified electronic receipt, which does not meet FBR standards, to the tax authority.

    Earlier, the FBR had advised electronic integration of points of sales (POSs) of all Tier-1 retailers of textile and leather sectors to ensure correct reporting of sales by retailers and realisation of overall due tax.

    Retailers must install software provided by the FBR, which reports sales tax to the tax authorities instantly.

    The installation of this software is crucial, as this is how the FBR gets to know about the number of sales made by a retailer, the tax paid, and what they charge the consumer.

    Interestingly, a POS invoicing prize scheme was first introduced in 2022 to promote tax compliance and documentation of the economy. The scheme involved conducting monthly ballots and distributing cash prizes among winners.

    Read more: Petrol, diesel prices likely to be reduced by more than Rs10 per litre for next fortnight

  • IMF wants FBR to bring over 20 million Pakistanis into tax net in five years

    IMF wants FBR to bring over 20 million Pakistanis into tax net in five years

    To broaden the tax base, the Federal Board of Revenue (FBR) has outlined its five-year objectives to the International Monetary Fund (IMF), sources reveal.

    The FBR aims to include over 20 million individuals in the tax net over the next five years, as per the IMF’s requirements.

    To meet this goal, the FBR plans to register 3.72 million people and 23,500 associations of persons within the current year. Additionally, more than 9,500 companies will be incorporated into the tax system during this financial year.

    For the following fiscal year, the FBR’s target is to add 3.91 million individuals, associations, and companies to its records. By FY27, the board aims to enrol 4.1 million non-filers, with a further increase to 4.31 million individuals by FY28.

    The goal for the 2028-29 financial year is to incorporate 4.525 million people into the tax net.

    Sources indicate that the IMF has insisted on the strict implementation of this plan, starting from the current financial year.

  • Telecom companies block 9,000 SIMs of non-filers under FBR directive

    Telecom companies block 9,000 SIMs of non-filers under FBR directive

    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.

  • Pakistan seeks global assistance to overhaul tax system amidst significant drop in active taxpayers

    Pakistan seeks global assistance to overhaul tax system amidst significant drop in active taxpayers

    In a significant development, the count of active taxpayers has dwindled to 3.4 million, marking a 41 per cent decrease from the previous year. The government is contemplating seeking financial support from the Bill and Melinda Gates Foundation to enhance digital services within the Federal Board of Revenue (FBR).

    According to Express Tribune, approximately 500,000 individuals were excluded from the Active Taxpayers List (ATL) for tax year 2023 due to delayed submission of annual income tax returns. These individuals will incur a nominal penalty for reinstatement. Newly appointed economic czar, Muhammad Aurangzeb, chaired his inaugural meeting to explore avenues for improving digital services and expanding the tax base.

    The gathering, which included representatives from Karandaaz Pakistan, a firm specializing in financial inclusion services, concluded with the decision for Karandaaz to approach the Bill and Melinda Gates Foundation for financial backing in establishing a digital platform within the FBR.

    The government aims to streamline interactions between tax authorities and taxpayers, fostering transparency and curbing corruption. This initiative arises as the number of active taxpayers further drops to a mere 3.4 million, compared to last year’s figure of over 5.7 million—an alarming 41 per cent reduction.

    The FBR, having received 3.9 million income tax returns, removed approximately 500,000 individuals from the active list due to delayed filings. Consequently, those not on the active taxpayers list will face a 0.6 per cent withholding tax on cash withdrawals.

    To encourage compliance, the government allows the reactivation of approximately 500,000 individuals by paying a nominal Rs1,000 fine for late filing of returns. The International Monetary Fund (IMF) is expected to exert pressure on the government to expand the tax base and simplify tax slabs for both salaried and business individuals.

    Recent data reveals a noteworthy contribution of Rs217 billion from the salaried class in the first eight months of the current fiscal year, surpassing the combined taxes paid by rich exporters and real estate players by Rs37 billion, or one-fifth.

  • FBR restructuring: 145 offices set up to add 2 million new taxpayers

    FBR restructuring: 145 offices set up to add 2 million new taxpayers

    In a bid to streamline operations, the Federal Board of Revenue (FBR) has set up 145 district tax offices, aiming to bring in 1.5 to 2 million new taxpayers by June 2024. 

    Highlighting the significance of revenue and the need to increase the number of tax filers, the Prime Minister also stressed these goals in recent meetings.  

    The initiative is geared towards expanding the tax base, ultimately achieving the desired tax-to-GDP ratio. 

    Heading these offices are district tax officers responsible for compelling income tax returns from non-filers and preventing lapses from existing filers.  

    This marks a pivotal step in bridging the critical tax gap and incorporating all potential taxpayers into the system. 

    The newly established offices, led by dedicated Inland Revenue Officers in BS-17/18, will leverage third-party data obtained from various departments to track information on asset investments and significant expenditures by potential taxpayers.   

    This approach aims to curtail avenues for individuals evading taxation, particularly in terms of registration and filing returns. 

    The department will invoke the recently introduced Section 114B in the Income Tax Ordinance, 2001, to enforce compliance, enabling it to disconnect utility connections (such as electricity and gas) and block mobile SIMs if returns are not filed in response to issued notices. 

    A new documentation law is also in the works to mandate agencies and departments to provide data to the FBR through an automated common transmission system. 

    The Federal Board of Revenue has sought collaboration with the National Database and Registration Authority (NADRA), and the Chairman of NADRA is ensuring assistance for the expansion of the tax base through data integration. 

    This comprehensive initiative not only strengthens the FBR’s capacity to enforce tax laws but also facilitates taxpayers by establishing dedicated offices, ultimately fostering a more efficient and effective taxation system. 

  • No extension for tax return deadline, only commissioner-requested extensions accepted

    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.

    More to follow..