27/08/2021
Non Filers Sims, Electricity , Gas. Blockage
ISLAMABAD:
In a radical move, the government has proposed to disconnect mobile phones, electricity and gas connections of non-filers of income tax returns and bar businessmen from using banking instruments like cheques in its desperate attempts to broaden a narrow tax base.
The proposal also includes slapping 35% additional income tax on electricity bills of lawyers, dentists, doctors, accountants and also to share all types of data of the existing taxpayers with the National Database Registration Authority (Nadra), sources told The Express Tribune. This will take their total income tax to 43% of the billed amount.
“The drastic steps will be enforced by promulgating an ordinance and in this regard a draft bill has been sent to the law ministry this week for vetting by the Federal Board of Revenue,” they added.
Read: Reforms underway to improve tax system: PM Imran
The steps are being taken to broaden the narrow tax base comprising only three million income tax return filers after all previous efforts and policy actions have failed to yield the desired results.
“The most drastic measure is the introduction of compulsory digital mode payment by the corporate sector,” the sources noted. They said the step is being recommended after businessmen and companies started trading bank cheques instead of en-cashing them to avoid full disclosure of their sales.
The FBR has proposed an amendment to Section 21 of the Income Tax Ordinance that says that no deduction shall be allowed in computing the income of a person under the head “Income from Business” by a taxpayer not being a company.
Similarly, any expenditure by a taxpayer being a company for a transaction, paid or payable under a single account head which, in aggregate, exceeds Rs250,000 made other than by digital means from business bank account of the taxpayer will be treated as income instead of expenditure.
The only exemption from the digital payment will be small payments of up to Rs25,000 and expenditures on account of utility bills, freight charges, travel fare and payment of taxes. If approved by the cabinet, this move will hugely benefit the digital payments service providers.
However, the government has decided to enforce digital mode of payments without first plugging loopholes that led to creation of black money like difference between market value and FBR values of properties, agriculture income tax exemption and tax-free foreign remittances.
Disconnection of essential services
Sources said the FBR has proposed to include a new clause in the income tax law to get powers to suspend essential services being availed by those who do not file their income tax returns.
Through an Income Tax General Order, the FBR will first declare persons who are not appearing on the active taxpayers list liable to file return. If they do not file the returns, then the FBR will ask the concerned service providers to disable mobile phones service and disconnect electricity and gas connection, the sources said.
Read more: Govt to share tax record with NADRA
Giving NADRA access
Sources said the government has also proposed to include a new section 175 B in the Income Tax Ordinance to handover all data of existing as well as non-existing taxpayers to Nadra to broaden the tax base. Earlier, the powers were only limited to the extent of the unregistered persons.
Nadra will then develop a citizen’s portal to identify unregistered taxpayer for broadening of tax base and identify evasion or avoidance of tax by registered taxpayers.
It will also utilise information available with Nadra and data shared by the board for computing indicative income and tax liability of unregistered as well as registered person by using artificial intelligence and mathematical modeling, sources said.
The sources revealed that in 2019, FBR had discreetly handed over the tax record of income tax return filers for the period 2014 to 2018 to Nadra. Sources added that the FBR had already handed over withholding tax statements
