ISLAMABAD: There is no proposal under consideration at any quarter in the Federal Board of Revenue (FBR) to bring reforms changes in present tax system to make it mandatory for all citizens of the country to file their income tax returns. However, in order to promote a culture conducive to filing of tax returns FBR has introduced an innovative tax policy measures.
A well placed source at FBR told Customs Today that the primary idea behind this concept was 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 higher rates of tax deduction and collection under various provisions of the law have been introduced for non-filers.
The source said that at present only persons specified in section 114 were 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 minimum threshold of income liable to tax for individuals/association of persons (AOPs) is income in excess of Rs. 400,000/- per annum.
The source added that FBR had envisaged a scheme wherein each and every citizen was legally obliged to file income tax return would place undue burden and create hardships for people belonging to the lower income strata having no taxable income.
Another major policy measure 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, 2015 prescribing a differential tax rate for banking transactions by non-filers which is currently being collected @0.4%.
The source said that these measures had started yielding results as people were compelled to file their tax returns due to the increased cost of doing business. Resultantly the number of tax returns filed for tax year 2015 was 1,125,543 as against 1,074,304 returns filed for tax year 2014.
