ISLAMABAD: The Federal Board of Revenue (FBR) is pursuing an innovative tax measures to promote a culture conducive to filing of tax returns.
The primary idea behind this concept is to increase the cost of doing business for non-filers and unregistered persons in comparison with taxpayers who regularly file their income tax returns, thereby compelling non-compliant persons to file their tax returns.
Towards this end, a well placed source at FBR told Customs Today that higher rates of tax deduction /collection under various provisions of the law had been introduced for non-filers.
At present only persons specified in section 114 are legally obliged to file income tax returns which include companies, non-profit organization, persons owing certain specified assets and individuals and association of persons earning a minimum threshold of income. Currently the 18 minimum threshold of income liable to tax for individuals/AOPs is income in excess of Rs. 400,000/- per annum.
Another major policy measure, the source said, for providing an impetus for enhancing the level of compliance of tax laws was the introduction of an exclusive withholding tax regime under section 236-P of the Income Tax Ordinance, 2001 through the Finance Act, prescribing a differential tax rate for banking transactions by non-filers which is currently being collected @0.4%.
These measures have started yielding results as people are compelled to file their tax returns due to the increased cost of doing business. Resultantly the number of tax returns filed for previous tax year was 1,125,543 as against 1,074,304 returns filed for tax year 2014.
At present the source said that there was no proposal under consideration of the government to make mandatory for all citizens of the country to file their income tax returns. Without prejudice to the above, envisaging a scheme wherein each and every citizen is legally obliged to file his income tax return would place undue burden and create hardships for people belonging to the lower income strata having no taxable income.
