The Institute of Chartered Accountants of Pakistan (ICAP) has put forward recommendations to streamline the tax refund process for salaried individuals to their bank accounts and strengthen whistle blower protection.
In their suggestions for the budget of 2023-2024, ICAP aims to enhance the efficiency and transparency of tax operations.
Direct Tax Refunds for Salaried Individuals:
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ICAP proposes that salaried individuals should receive their refund amounts directly to their bank accounts. According to the recommendations submitted to the Federal Board of Revenue (FBR), refunds for salaried individuals up to Rs 300,000/- should be automatically credited to their bank accounts without requiring a separate refund application. This would be based on the refund amount indicated in the annual tax return, provided that the refund is easily verifiable. The suggested timeframe for processing refunds is six months from the date of filing tax returns.
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Whistle Blower Protection:
ICAP highlights the concept of Whistle Blower Protection introduced through the Whistle Blower Protection and Vigilance Commission Act, 2019, published on November 1, 2019. However, due to a lack of trust, this concept has not yielded significant results. To reinforce the effectiveness of the program, ICAP proposes that complete anonymity be granted to individuals providing information regarding tax evasion, inconsistency, or tax fraud.
Field officers of the FBR should not have access to any information related to the whistle blower. As an incentive, whistle blowers should be considered for a reward equivalent to 20% of the tax recovered, directly credited to their bank accounts. The ICAP also suggests incorporating this feature into the Tax Asaan App for ease of use.
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Compulsory National Tax Number (NTN) for Non-Filers:
ICAP recommends the issuance of a compulsory National Tax Number (NTN) for individuals who are non-filers and make use of certain facilities. These individuals should not be granted access to the following services until they become filers, in accordance with the Income Tax Ordinance, 2001:
1. Issuance/renewal of passports
2. Commercial/industrial electricity, gas, and water connections
3. Three-phase residential electricity connections
4. Sale and purchase of vehicles/motorbikes
5. Transfer/purchase of properties
6. Foreign travel
7. Membership of renowned clubs
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Exceptions may be made for non-residents who are not required to file returns under section 114 of the Income Tax Ordinance, 2001, as well as for education/medical purposes, dependent ladies/widows, pensioners, and individuals under 21 years of age. In these cases, the tax return of the sponsor would be required.
ICAP’s recommendations seek to improve the tax system in Pakistan by introducing direct tax refunds for salaried individuals and reinforcing whistle blower protection. By facilitating automatic bank transfers of refunds, the process would be streamlined, ensuring a quicker and more efficient experience for taxpayers. Granting complete anonymity and offering incentives to whistle blowers would encourage the reporting of tax evasion and contribute to enhanced tax compliance. Additionally, implementing a compulsory NTN for non-filers using specific facilities would encourage tax filing and increase the tax base in the country.
