Please wait as banks’, FBR systems match

IT glitch means many still non-filers even after filing returns

ISLAMABAD: People having the will and mental strength to file income tax returns - in their attempt to avoid withholding taxes on banking as well as a host of other transactions - are being unable to fulfill their legal obligations due to a slight glitch.

Malfunctioning of the Federal Board of Revenue’s (FBR) information technology system has resulted in a host of filers finding their names missing from the most recent Active Taxpayer List (ATL) uploaded on the database. While they may have filed their returns, the missing names means that banks are unable to find proof of them fulfilling their duty, resulting in withholding tax deductions that the government has levied on non-filers. The government allows exemptions and reduction in withholding tax rates to only those people who are active taxpayers.

The latest malfunction came to surface when the FBR uploaded its new ATL. While updating the latest list of active taxpayers, the FBR removed the last check digit from the National Tax Numbers without giving prior notice to the banks, creating a mismatch between the banking and the FBR IT systems, sources said.

Read: FBR serves tax audit notices to three opposition senators

Consequently, all filers who are filing the income tax returns are being treated as non-filers by the banking system, they added.

Sources in the banking industry said the core banking systems cannot automatically remove the check digit. These system changes require considerable time and resources and during this interim period a filer will be treated as a non-filer. They said banks could not change or edit account holders’ records without seeking approval of the account holder.

In a country of about 200 million people, only 937,000 file income tax returns, showing the lack of will and tax-paying culture.

The latest problem arose at a time when less than a week remains till the September 30 deadline to file income tax returns. After the deadline, non-filers will be subject to payment of 0.6% withholding tax on all banking sector transactions. Currently, the withholding tax on banking transactions is 0.3%, which will be doubled from October 1.

The usual inefficiency of the FBR, coupled with rampant corruption, has led to a situation where tax revenues are plunging. Sources said the situation became so grave that the Ministry of Finance arranged Rs10 billion from ‘various sources’ to help the FBR meet its quarterly tax target of Rs647.4 billion.

KTBA

Besides the banking industry, the country’s largest tax bar association has also agitated against the IT glitches. Karachi Tax Bar Association (KTBA) has complained to Finance Minister Ishaq Dar about the highly inefficient IT system.

“The Newly introduced system at IRIS is cumbersome, difficult and time consuming,” wrote KTBA President, Mohammad Zubair, in a letter sent to Dar on Tuesday.

Read: Limit FBR’s authority and restructure tax system

Additionally, the KTBA has protested against delayed up-gradation of income tax return forms and sought two-month extension in deadline to file the returns.

Published in The Express Tribune, September 23^rd, 2015.

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