Karachi, December 19, 2024 – Pakistan has decided to implement stringent measures to curb tax evasion by prohibiting bank cash withdrawals for individuals who evade taxes.
This landmark move, introduced through the Tax Amendment Bill 2024, was presented in Pakistan’s Parliament a day earlier and aims to strengthen the Federal Board of Revenue’s (FBR) capacity to enforce tax compliance.
The bill introduces Section 114C to the Income Tax Ordinance of 2001, granting the FBR authority to direct banks to refrain from opening or maintaining current, savings, or investor portfolio securities accounts for individuals who fail to file income tax returns. This provision specifically targets those absent from the Active Taxpayers List (ATL), further incentivizing compliance with tax filing requirements.
A pivotal aspect of the legislation is its restriction on cash withdrawals. The FBR will determine and notify limits on cash withdrawals from the accounts of non-filers, creating a significant deterrent to non-compliance. By limiting access to liquidity, Pakistan seeks to minimize economic participation by those shirking their tax obligations.
The bill extends beyond cash restrictions, imposing additional measures on non-filers. It prohibits them from applying for, booking, purchasing, or registering motor vehicles, with compliance enforced by manufacturers and the Excise and Taxation Department. Moreover, non-filers will be barred from registering, recording, or transferring immovable property exceeding a specified value, as notified periodically by the FBR. Transactions in securities, including mutual funds and debt instruments, are similarly restricted.
Despite its comprehensive nature, the bill provides exceptions to facilitate certain economic activities. Non-filers may acquire rickshaws, motorcycle rickshaws, or tractors, and vehicles with engine capacities up to 800 CC, subject to further conditions. Limited investments in securities are also permissible within thresholds set by the FBR. Crucially, individuals who file tax returns for the latest fiscal year and disclose sources of income and expenditure will be exempt from these restrictions.
These reforms form part of Pakistan’s broader strategy to enhance tax compliance, widen the tax net, and reduce evasion. By leveraging financial institutions and curtailing access to key services, the FBR aims to foster a culture of accountability and boost revenue collection. If enacted, the legislation will significantly impact Pakistan’s banking, property, and vehicle registration sectors, reshaping the financial landscape for non-compliant taxpayers while reinforcing the nation’s fiscal framework.