Late return filers may be allowed entry into ATL

Late return filers of income tax may soon have the opportunity to be included in the Active Taxpayers List (ATL) following proposed amendments to tax laws.

Being part of the ATL is essential for taxpayers to avail themselves of the benefits associated with reduced income tax rates on various financial transactions.

Previously, the Finance Act of 2018 had disallowed late filers from having their names included in the ATL. However, this could change with the potential revision of these regulations.

Under the current system, if a person files their tax return for the year 2018 after the due date, they will be considered a return filer but will not have their name included in the ATL. The ATL is typically issued on March 1st of each year, which means that those who filed late in 2018 would need to file their income tax return for the year 2019 and wait until March 2020 to qualify for the reduced rate of withholding tax.

Sources within the Federal Board of Revenue (FBR) have indicated that this restriction has led to a significant decrease in the number of return filers during the 2018 tax year.

The FBR reported receiving approximately 1.5 million tax returns for the 2018 tax year, and these individuals would have qualified for inclusion in the ATL. However, recent data from the latest weekly ATL of 2018 indicates that the number of return filers has increased to 1.8 million. Consequently, it is expected that the next ATL will include fewer return filers.

Given the potential loss in the number of return filers, the government is actively considering lifting the restriction to allow late filers to gain access to the ATL. This change could have several implications for the taxation landscape in Pakistan.

Firstly, it is expected to encourage more individuals to file their tax returns on time, ensuring that they benefit from the reduced rate of withholding tax. Additionally, it can potentially lead to an increase in government revenue as more taxpayers become eligible for the ATL and are subject to the preferential tax rates.

Furthermore, including late filers in the ATL could contribute to a fairer and more comprehensive taxation system, as it would capture a broader segment of the population and encourage greater tax compliance. In the long run, this move is likely to enhance transparency and accountability in the taxation process.

The proposal to allow late filers entry into the ATL is a step that has been viewed positively by many, as it reflects an effort to simplify and encourage tax compliance. It also acknowledges the challenges that individuals may face in meeting filing deadlines and aims to provide them with a more equitable opportunity to benefit from the reduced withholding tax rates. The potential change is expected to boost tax collections while promoting a more inclusive and just tax system in Pakistan.

As the government considers these changes, it is important to ensure that the measures put in place for late filers are well-defined and transparent, while still maintaining the integrity of the tax collection process. Balancing the needs of taxpayers with the goals of revenue collection is a delicate task, and the upcoming amendments should aim to strike this balance effectively.

Overall, the potential inclusion of late filers in the ATL signals a move toward a more equitable and accessible tax system in Pakistan, one that encourages tax compliance and enhances transparency. This development is poised to impact the tax landscape positively, ensuring that more individuals can benefit from reduced tax rates while contributing to government revenue.