Chairman of the Federal Board of Revenue (FBR), Rashid Mahmood Langrial, announced that the government has decided to completely eliminate the concept of non-filers of income tax returns from tax laws.
During a presentation to prominent business and trade groups at the FBR Headquarters, Mahmood discussed plans aimed at transitioning Pakistan’s cash economy into a more documented system. This initiative is expected to reduce the current tax gap, estimated at Rs. 7.1 trillion.
In a meeting that included businessmen from key industries, State Minister for Finance and Revenue, Ali Pervez, senior tax managers, and FBR Members, the FBR Chairman outlined the steps to abolish non-filers. He emphasized that non-filers will no longer exist in the future tax system. “There will be no concept of non-filers in the future,” Mahmood said.
Additionally, the government plans to disallow cash withdrawals via cheques beyond a certain threshold, in efforts to curb non-documented financial activity. Initially, the plan was to ban non-filers from purchasing assets, but now the government aims to entirely remove the definitions of non-filers and later abolish Schedule 10 from the Income Tax Ordinance.
Mahmood warned that if tax compliance does not improve, it will be difficult for the government to meet its revenue targets, even with new tax measures. He stressed the need to increase the tax-to-GDP ratio while reducing the burden on current taxpayers. He further explained that high tax rates are causing businesses and skilled professionals to leave the country, citing the textile industry as an example.
The FBR is preparing to introduce disincentives for non-compliant taxpayers, linking services like investments, property purchases, and the creation of bank accounts to tax return filings. In addition, monetary transactions will be scrutinized, with the source of funds being verified through digital systems.
Mahmood described non-filing as a form of domestic tax fraud and reaffirmed the commitment to eradicate it. Property transactions will be categorized as either “eligible” or “ineligible” based on tax compliance, further incentivizing filing.
A presentation slide from the FBR showed proposed reforms that classify taxpayers into tiers based on their declared income (e.g., more than Rs. 10 million or less than Rs. 10 million). Depending on their income, taxpayers will be allowed to purchase motor vehicles, real estate, and make other investments. Annual cash deposit/withdrawal limits will also be imposed, with a cap of Rs. 30 million per year for individuals.
Another key reform includes a cap on cheque issuance for cash transactions. The FBR will provide data to banks based on tax returns, setting specific transaction limits. If these limits are exceeded, the transactions will be flagged and reported to the FBR. This new system is expected to be operational within a few months.
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