Islamabad, June 15, 2024 – The Finance Bill 2024 has introduced higher withholding tax rates for users of telephone and internet services, effective from July 1, 2024. This change aims to enhance tax compliance and revenue collection by the Federal Board of Revenue (FBR).
According to a budget commentary issued by A. F. Ferguson & Co. Chartered Accountants on the Finance Bill 2024, the FBR has been granted additional powers to enforce tax compliance. These powers include the ability to disable mobile phones and discontinue electricity and gas connections for individuals whose names do not appear on the Active Taxpayers List (ATL) but are liable to file income tax returns.
To implement these measures through Finance Bill 2024, the FBR can issue a general order targeting non-compliant individuals. Under the new provisions, the withholding tax rate for these individuals is set to increase significantly. Specifically, the tax rate will rise from 15% to 75% of the amount of the bill as introduced under Finance Bill 2024, sale price of internet prepaid cards, prepaid telephone cards, or the sale of units through any electronic medium.
This substantial increase through the Finance Bill 2024 aims to incentivize compliance with tax filing requirements. However, it also raises concerns for those affected. Even if an individual files their income tax return and their mobile connection is restored according to the process outlined in the general order, they may still face the higher withholding tax rate until their name is officially removed from the list of non-compliant individuals.
Tax experts warn that this could create additional financial burdens for taxpayers. “The proposed increase in withholding tax rates under Finance Bill 2024 is significant and could impact a large number of phone and internet users,” said a representative from A. F. Ferguson & Co. “The mechanism for restoring compliance and the associated tax implications need to be clearly communicated to avoid confusion and undue hardship.”
The measures under the Finance Bill 2024 reflect the government’s efforts to broaden the tax base and improve tax compliance. By targeting non-compliant individuals with higher tax rates and the potential for service disruptions, the FBR aims to encourage more people to file their income tax returns.
However, the implementation of these measures will need careful monitoring to ensure that it effectively targets non-compliance without causing excessive disruption to services or undue financial strain on taxpayers.
As the new tax rates come into effect, users are advised to check their tax status and ensure they comply with filing requirements to avoid the increased withholding tax and potential service interruptions. The FBR will likely provide further guidelines on the implementation of these measures in the coming weeks.
