FBR asks FinMin to declare new transaction in return

Aurangzeb backs such steps; FBR chief insists text messages to filers don't breach privacy

ISLAMABAD:

The Federal Board of Revenue (FBR) has sent a nudging SMS to its boss, the finance minister, urging him to declare a transaction in his tax return, revealed Muhammad Aurangzeb on Wednesday while backing the FBR in its drive to broaden the tax base through such steps. "I also received a nudging tax message from the FBR," said the finance minister in a meeting of the Senate Standing Committee on Finance.

He was responding to the issue of text messages sent by the FBR to the taxpayers, carrying information about the financial transactions carried out during the last tax year. PPP Senator Saleem Mandviwalla chaired the standing committee meeting. Aurangzeb supported the FBR's initiative, launched in September last year to encourage the return-filing taxpayers to declare new transactions in annual returns for tax year 2025. The standing committee took up the matter on a motion moved by Senator Asad Qasim, who had raised the issue of text messages being sent to filers, containing the bank balance and transacted amount, which breached financial privacy.

Because of these messages, the number of income tax returns increased by one million and the ratio of "nil-filers" also decreased, said Rashid Langrial, Chairman FBR. The FBR had launched many initiatives, including denying the right to buy a property, a car or have a bank account by non-filers and ineligible filers, but all such measures were rolled back in the wake of public pressure.

By the extended deadline of October 31, the FBR had received six million returns, higher by one million compared to the preceding year. However, the total returns filed by individuals and companies have now dropped by 10% to 7.2 million for tax year 2025. For 2024, the FBR had received eight million income tax returns, showed official data.

The FBR's messages were based on the information declared by the return filers to property and vehicle registration authorities. The finance minister admitted that "the tax base is not expanding". The FBR chairman said that many respected people were becoming a hurdle in the tax enforcement drive and proposed an in-camera meeting to disclose their names. The messages to Senator Qasim "do not constitute a breach of financial privacy, rather they are part of an evidence-based approach to strengthen voluntary compliance and ensure that taxpayers are aware of their own declared and third-party financial information," said the FBR chief.

The purpose of recent messages is to enhance taxpayers' awareness and compliance through behaviorally informed nudges, said the FBR. It added that the information pertains to the taxpayer's own financial profile and it is shared only with the person to whom the data belongs. No third party is ever involved in the transmission of such messages and all communications are made through secure official channels, according to the FBR. Under the Income Tax Ordinance, the FBR is empowered to obtain third-party data from various institutions for broadening the tax base and improving compliance, it said.

The FBR apprised the committee that all such data was held within the FBR's secure systems and used solely for risk-based analysis and taxpayer facilitation, in strict conformity with the provisions of the law and the data protection rules. "The FBR remains fully cognisant of citizens' right to financial privacy and ensures the highest standards of data security and confidentiality," it added.

The super tax was also discussed, with the FBR assuring case-to-case facilitation of taxpayers. Senator Abdul Qadir urged the FBR to stagger super tax collection over a period of two years as the taxpayers were suddenly forced to make huge payments due to a judgement of the Federal Constitutional Court. The FBR chairman clarified that the total estimated collection of super tax was Rs217 billion against the earlier reported figure of Rs300 billion.

The standing committee strongly criticised the practice of commercial banks charging an additional fee for SMS alerts and other customer services, recommending that such charges be discontinued. The chairman directed the SBP governor to take immediate notice of the matter and brief the committee in its next meeting.

The SBP governor defended banks, saying that the financial institutions were not making any profit from SMS alerts. "The governor should clamp down on banks instead of defending them, said Senator Mandviwalla.