ISLAMABAD: The tax authorities are facing challenging revenue collection after imposing curbs on non-filers in the budget 2018/2019.
The government is considering to roll back some of the conditions imposed on non-filers, especially on the purchase of motor vehicles, for enhancing revenue collection.
The government imposed the restriction on non-filers of income tax returns through Finance Act, 2018 by introducing Section 227C to Income Tax Ordinance, 2001 with aim to broaden tax base.
According to the Section 227C: “any application for booking, registration or purchase of a new locally manufactured motor vehicle or for first registration of an imported vehicle shall not be accepted or processed by any vehicle registering authority of Excise and Taxation Department or a manufacturer of a motor vehicle respectively, unless the person is a filer.”
However, due to ambiguity in purchase of small engine capacity and purchase by overseas Pakistanis a clarification inducted to this section through Finance Supplementary Act, 2018 as:
“Provided that the provisions of clause (a) shall not apply in respect of,─
(i) motorcycle having engine capacity of less than 200 cc, motorcycle-rickshaw, agricultural tractor or any other motor vehicle having engine capacity of less than 200 cc; or
(ii) a person holding a Pakistan origin card or a national identity card for overseas Pakistanis who produces a certificate from a scheduled bank of receipt of foreign exchange remitted from outside Pakistan through normal banking channels during a period of sixty days prior to the date of booking, registration or purchase of motor vehicle.”
However, this condition resulted in counterproductive to revenue collection as large chunk of revenue comes from car sales.
The situation further aggravated by introduction of Section 182A through Finance Act, 2018 under which a person files return after due date will not appear on the Active Taxpayers List (ATL). It means he will not be treated as filer for the year in which the return is filed after due date.
Such policy decisions have trapped the government, especially the enforcement of the Federal Board of Revenue (FBR) is very weak.
It is interesting that the government is considering to allow non-filer to purchase cars.
In case such decision is made it will clearly show that the authorities have failed to stop the un-documentation of economy. Further it will also allow people having black money to make transactions freely.
On the other hand, industries instead of helping the tax authorities in broadening the tax base advising the government to allow undocumented people to make transactions.