Islamabad, February 7, 2025 – The National Assembly is poised to approve the Tax Amendment Bill in its upcoming session, which aims to impose strict restrictions on non-filers of income tax returns, preventing them from engaging in various financial transactions.
Reliable sources informed Pakistan Revenue (PkRevenue.com) that the bill has already been placed on the legislative agenda for formal approval, following recommendations from the Senate. The National Assembly is scheduled to deliberate and vote on the bill on Monday, February 10, 2025.
The federal government is pushing for the swift passage of this bill ahead of the International Monetary Fund (IMF) mission’s visit. The approval of this legislative measure is considered crucial for securing the second tranche of the $7 billion bailout package from the IMF. In a significant development, the government has also convinced provincial authorities to enforce an agricultural tax, addressing one of the IMF’s major demands.
Restrictions on Non-Filers
As part of efforts to expand the tax base and enhance revenue collection, the government introduced major amendments to tax laws on December 18, 2024. These changes specifically target individuals who have taxable income but have not registered as tax filers.
Under the new legislation, a newly proposed Section 114C will impose sweeping restrictions on non-filers, barring them from engaging in key economic activities, including:
1. Vehicle Transactions: Any non-filer attempting to book, purchase, or register a motor vehicle will be prohibited from doing so. Vehicle manufacturers and excise and taxation authorities will be restricted from processing such applications.
2. Property Transactions: Authorities responsible for registering, recording, or attesting property transfers will be restricted from processing transactions exceeding a certain value unless the individual is a registered taxpayer.
3. Securities and Mutual Funds: Authorized entities dealing in securities, debt instruments, and mutual funds will not be allowed to sell or process transactions for non-filers.
4. Banking Restrictions: Banking companies will be prohibited from opening or maintaining current or savings accounts for non-filers, except for basic ‘Asaan’ accounts. Additionally, cash withdrawals exceeding a certain limit will not be permitted for non-filers.
Exemptions Under the New Law
While the bill imposes stringent measures, it provides certain exemptions. The restrictions will not apply to:
• Purchase of rickshaws, motorcycle rickshaws, or tractors.
• Pick-up vehicles with engine capacities up to 800cc.
• Certain categories of trucks and buses, subject to limitations set by the Federal Board of Revenue (FBR).
• Investment in securities, up to a specific threshold.
• Transactions by individuals who file income tax returns and declare sources of investment and expenditure.
• Non-resident individuals and public companies, except under specific clauses.
The bill also outlines provisions regarding the filing of a statement of sources of investment and expenditure. However, such statements will not be considered as valid declarations of income sources under Section 111 of the Income Tax Ordinance.
Implications for Non-Filers
The passage of this bill marks a significant step in the government’s broader agenda to enforce tax compliance and discourage informal economic activity. By restricting key financial transactions, the government aims to incentivize individuals and businesses to register as taxpayers, thereby broadening the tax net.
Economists and tax analysts believe that these measures will substantially impact high-value transactions and could drive many non-filers toward formal registration. However, concerns remain about the potential economic repercussions, particularly in sectors where informal transactions are prevalent.
“The restrictions on non-filers are long overdue and necessary to increase tax compliance. However, the government must ensure that the enforcement mechanisms are efficient and do not disrupt legitimate economic activities,” said a senior tax analyst.
Political and Economic Context
The introduction of this bill comes at a time when Pakistan is facing mounting pressure to enhance revenue collection and meet IMF-imposed financial targets. The government’s commitment to curbing tax evasion aligns with its broader economic reform strategy, which includes stricter enforcement against non-filers.
As the National Assembly prepares to vote on this critical bill, stakeholders from various sectors are closely watching its progress. If approved, the new law will introduce a paradigm shift in Pakistan’s taxation system, potentially altering the landscape of financial transactions for individuals and businesses alike.
The coming days will be crucial in determining the fate of this legislation and its impact on the country’s economy. With the IMF mission’s visit on the horizon, the approval of this bill could significantly influence Pakistan’s financial negotiations and future economic stability.