Tax returns stay below 1.5m

Confusion over policy actions, situation arising out of floods hold back taxpayers

ISLAMABAD:

With only two days remaining in the end of deadline for submission of income and asset details, so far less than 1.5 million tax returns have been filed and nearly one-third of these have made no tax payment.

While this time around the return filing largely remained smooth due to better functioning of the technology arm of Federal Board of Revenue (FBR), confusion over policy actions taken in the budget coupled with the situation arising out of floods held back taxpayers from fulfilling their obligation.

Sources said that so far about 1.45 million individuals, Associations of Persons (AOPs) and companies had filed annual tax returns, constituting hardly 40% of the taxpayers who submitted the returns during the last tax year – 2021.

In the three categories, the companies, which should have been more compliant, turned out to be less enthusiastic about the filing of returns.

Data compiled by the FBR showed that so far about 4,600 companies had filed annual returns. Of those, 3,750 filed nil returns. Nil returns mean that the companies did not do any business throughout the year.

One of the reasons for the lower number of returns filed by the companies is said to be that the fiscal year of many companies ends in December, unlike the normal July-June cycle.

However, the number of companies filing returns has significantly decreased compared to the previous tax year when over 67,000 firms submitted the tax returns. The ratio of return-filing companies this year was less than 7% compared to the previous tax year.

A reason for the delay in filing income tax returns for tax year 2022 is the ambiguity in declaration of the value of properties purchased and sold during the year, according to the Pakistan Tax Bar Association, the body which this week sought clarifications from the FBR over many ambiguities in tax laws.

Tax consultants were facing problems in working out liabilities on account of transactions of immovable properties, according to the association.

In the past five days, the Lahore High Court (LHC) and the Sindh High Court (SHC) have given interim relief to the banks and real estate dealers in the discharge of their liabilities on account of deemed income tax and advance-to-deposit ratio.

Unlike past, this time there are no frequent complaints against the Pakistan Revenue Automation Limited (PRAL) – the technology backbone of the tax system. So far, the income tax return filing is going on pretty smoothly, said a senior official of PRAL.

“All PRAL technical teams started working on the ITR module during the last financial year and resolved many known bugs in the system. PRAL is about to achieve the goal given by the FBR completely on September 30, 2022, through timely implementation of new architectural changes and infrastructure enhancement,” he added.

PRAL management foresaw the need for architectural upgrade along with infrastructure enhancement and took timely decisions for implementation, which is evident from the smooth filing of income tax returns this year, according to the PRAL official.

He said that the entity was getting positive feedback from the taxpayers, who appeared to be satisfied with PRAL’s performance as compared to previous years.

Details showed that so far about 25,000 AOPs had submitted returns, which were just 30% of the returns submitted in the previous year. Of those who filed the annual statements, 12,500 submitted nil returns.

Similarly, in the category of individuals, the FBR has so far received 1.4 million tax returns, which account for 40% of the return filers who submitted the annual income and wealth statements last year. Nearly one-third of the individuals, or about 438,000 people, submitted nil returns, according to the provisional details.

Out of the total tax returns of 1.45 million, about half a million were nil returns.

There is a general perception that the FBR will have to give an extension in the date for filing the annual accounts against the statutory deadline of September 30.

Sources said that unlike the commonly held view that the tax collection in flood-affected areas was on the decline, Regional Tax Offices (RTOs) of Sukkur and Hyderabad had performed better.

Published in The Express Tribune, September 29^th, 2022.

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