Karachi, November 29, 2023 – The Federal Board of Revenue (FBR) officials, entrusted with upholding Pakistan’s taxation integrity, have been afforded an extraordinary amnesty for filing their income tax returns, a move that is being denounced as a blatant mockery of the nation’s tax structure.
In an unexpected twist, the Chief Commissioner Inland Revenue of Regional Tax Office (RTO) – II, Karachi, a crucial revenue collection arm of the FBR, has unilaterally granted leniency to tax officials who failed to meet the October 31, 2023 deadline for the tax year 2023, extending the window until December 31, 2023. This extension, not only for the current year but also encompassing previous years, comes without the imposition of the customary late filing penalties.
It is pertinent to mention here that despite requests from chambers of commerce, tax bars, and other stakeholders, the FBR had refused to extend the return filing deadline beyond October 31, 2023.
The audacious decision implies that if these officials fail to comply by the extended deadline, the office will embark on recovering penalty amounts by deducting them directly from their salaries. A list of approximately 307 defaulting officials has been forwarded to RTO-I Karachi, shedding light on a troubling trend of non-compliance within the FBR.
The Chief Commissioner RTO-II Karachi declared, “Non-filing of returns by FBR employees is deeply unsettling for our organization and warrants urgent attention. These officers must be directed to file their returns promptly.”
He added a stern warning, “Post-December 31, 2023, I will be compelled to instruct the relevant commissioner to penalize non-filers and recover penalties as per the law. Further, the cessation of IJP allowance may also be recommended to the Board [the FBR].”
This revelation raises serious questions about the integrity of Pakistan’s taxation system, as it begs the inquiry: How can the FBR, with its officials as defaulters, earnestly urge citizens to fulfill their tax obligations?
While the RTO-II Karachi’s initiative to enforce compliance among FBR officials is commendable, the absence of a formal extension application raises alarms about the Chief Commissioner’s authority to unilaterally extend the deadline.
The Income Tax Ordinance, 2001, dictates tax-related matters in Pakistan, stipulating penalties and prosecutions for non-compliance. Only the FBR possesses the authority to grant return filing dates for the general public, with individual cases requiring application-based extensions from the concerned commissioner.
A senior FBR official, confirming the authenticity of the letter, commended the initiative to penalize non-compliant FBR officials. However, they pointed out discrepancies in the list, highlighting names exempt from filing returns due to salaries falling below the threshold of Rs 600,000 annually.
In response, the official criticized the Chief Commissioner RTO-II Karachi for overstepping boundaries by imposing a timeline for filing income tax returns before penalty recovery.
As per the Income Tax Ordinance, 2001, individuals failing to furnish a return of income within the due date face penalties ranging from 0.1% of the tax payable per day to a minimum of Rs 10,000 (for individuals with 75% or more income from salary) and Rs 50,000 in all other cases. The penalties can reach a maximum of 200% of the tax payable in a tax year.
The official recommended that fines, as per the Ordinance, apply universally, including to government employees. Instead of amnesty, RTO-II Karachi should issue notices under Section 114, demanding non-compliant officials to file their returns along with fines and penalties prescribed by law. Furthermore, the chief commissioner should propose departmental inquiries against non-compliant tax officials, setting an example for the entire nation.
With Pakistan grappling with a paltry tax base, comprising only 5 million filers out of a population of 240 million, the FBR’s ongoing efforts to expand the tax base are underscored by the urgency to foster national responsibility.
It is pertinent to mention here that FBR had refused to extend the return filing deadline beyond October 31, 2023 despite requests of chambers of commerce, tax bars and other stakeholders.