Government to impose stricter rules on non-filers
The government has moved forward with further tightening the grip on non-filers by presenting the Tax Law Amendment Bill 2024-25 in the National Assembly.
According to the proposed amendments in the bill, non-filers will be prohibited from purchasing vehicles over 800cc, acquiring property beyond a specified limit, and making stock purchases beyond a certain threshold.
Additionally, non-filers will not be able to open bank accounts, and there will be restrictions on the number of banking transactions they can conduct. However, non-filers will still be allowed to purchase motorcycles, rickshaws, and tractors.
Non-registered business owners’ bank accounts will be frozen, and in the case of approval of the proposed amendments, non-registered individuals will not be able to transfer property.
The government will have the authority to seize the property of non-registered individuals involved in businesses. The Federal Board of Revenue (FBR) will release a list of individuals, and their accounts will be frozen.
The restrictions outlined in the bill will come into effect after the federal government issues a notification. Bank accounts will be frozen, and property transfers will be blocked for individuals who do not register for sales tax. Accounts will be unfrozen within two days after sales tax registration.
Under the proposed amendment, individuals will be able to appeal to the Chief Commissioner to unfreeze accounts. For the purposes of this bill, parents and children of filers, including children up to 25 years old and spouses, will be considered as filers.
A month ago Pakistan’s Finance Minister, Muhammad Aurangzeb, announced restrictions on property and vehicle purchases for non-filers, emphasising that difficult economic decisions are necessary for improvement.
In a press conference in Washington, Aurangzeb stated that there is a need for legal coverage regarding non-filers, and Pakistan is moving to eliminate the non-filer category altogether. He highlighted ongoing efforts to raise Pakistan's tax-to-GDP ratio from 9% to 13%, with inflation rates and the policy rate showing improvement as a result.
The finance minister pointed to steady progress toward macroeconomic stability, mentioning that all major rating agencies have positively noted Pakistan’s economic direction.
Langrial for improving tax receipts
Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial has agreed with Lahore Chamber of Commerce and Industry (LCCI) President Mian Abuzar Shad that the current sales tax, corporate tax, and income tax rates in Pakistan are excessively high and should ideally be reduced.
However, he emphasised that any reduction in these rates can only be implemented if the country's taxation system is capable of effectively capturing revenue across all segments of the economy.
While addressing a meeting at LCCI on Tuesday, FBR chairman highlighted that Pakistan's current tax-to-GDP ratio stands at 10.3%, well below the required level. He pointed out that the sales tax-to-GDP ratio is only 3%, whereas it should ideally be at least 5%. The chairman also revealed a significant gap in tax collection, with a shortfall of Rs3.1 trillion in sales tax and Rs2 trillion in income tax.
FBR chairman noted that Pakistan has approximately 67 million employed or job-seeking individuals. Among them, the top 1% of earners, roughly 670,000 individuals, should be contributing significantly to income tax. However, only 200,000 of them are paying the correct amount, while many others are either under-filing or evading taxes altogether. If taxed accurately, the potential revenue from these individuals could reach Rs1.7 trillion.