Karachi, November 18, 2023 – In a major move to enhance tax compliance, the Federal Board of Revenue (FBR) has initiated a significant crackdown against non-filers of tax returns by employing stringent measures, including the disabling of mobile phone and electricity connections, according to official sources on Saturday.
An FBR official has confirmed that the country has decided to activate Section 114B of the Income Tax Ordinance, 2001, as part of a comprehensive strategy to broaden the tax base. Pakistan currently grapples with one of the lowest tax-to-GDP ratios globally, with only 5 million individuals filing tax returns as of the tax year 2022, out of an estimated population of 240 million.
For the tax year 2023, the FBR opted not to extend the deadline for filing annual tax returns beyond October 31, 2023, resulting in the submission of 2.9 million returns by the deadline. However, in a bid to encourage greater compliance, the FBR has signaled its intent to take harsh actions, including the disconnection of electricity, gas, and mobile phone services.
The FBR has outlined a comprehensive strategy to expand the tax base by establishing 145 district tax offices tasked with identifying potential taxpayers. Additionally, senior officials have been deployed to these district tax offices, providing access to third-party information on individuals engaged in significant financial transactions but not yet included in the tax net.
According to tax officials, Section 114B of the Income Tax Ordinance, 2001, grants the FBR the authority to compel the filing of tax returns. The section empowers the Board to issue income tax general orders for individuals not appearing on the active taxpayers’ list but are obligated to file returns under the Ordinance.
The consequences outlined in the income tax general order may include the disabling of mobile phones or SIM cards, discontinuation of electricity connections, or discontinuation of gas connections.
The FBR or the Commissioner with jurisdiction over the individuals mentioned in the income tax general order may order the restoration of mobile phones, SIM cards, and utility connections if they are satisfied that the return has been filed or the person was not liable to file a return under the provisions of the Ordinance.
However, individuals cannot be included in the general order unless specific conditions are met, including the issuance of a notice under subsection (4) of section 114, the elapsed date of compliance with the notice, and the non-filing of the return.
Importantly, the actions taken under this section will not preclude any other actions provided under the provisions of the Ordinance. This crackdown is expected to have a far-reaching impact on encouraging tax compliance across the country.
