EDITORIAL: Spokesperson/Member Audit, Syed Hussain Rizvi, during a press conference revealed that Pakistan Revenue Automation Limited (PRAL) operating within the Federal Board of Revenue (FBR) will introduce the concept of pre-filled income tax returns for salaried individuals and retailers/shopkeepers with an annual turnover of 10 million rupees to integrate with National Database Registration Authority (Nadra) on real- time basis, and thereby ensure mandatory mention of their national identity card by the withholding agents.
This amendment, Rizvi claimed, would greatly facilitate the taxpayers because their data would have already been filled. The usual hitch associated with the launch of a new income tax return form, disturbingly an almost annual exercise by the FBR, has been a lack of comfort level due to lack of familiarity with the return form within the existing and prospective tax payers. The objective of the FBR with respect to this recent change is to increase the number of filers and as per Rizvi the Board envisages 20 to 25 percent growth in filing returns with this new form. Given the small base of filers in the country, Rizvi further stated that adjustments had been made to increase the number of filers adding that initially the Board had run the benchmark of 100 million rupees turnover and found that this would benefit only 17,000 to 18,000 retailers which prompted the reduction of turnover to 10 million rupees.
However, previous amendments to the form with similar ambitious targets remained unmet for two reasons: (i) the large number of shopkeepers/retailers and individuals whose tax is not cut at source and who are non-filers are not literate and do not have the resources to hire tax lawyers to file their returns; and (ii) those who are able to hire tax lawyers and who are operating in the parallel illegal economy are not incentivized to pay taxes given the fact that the tax structure remains ambiguous and discriminatory - an example being converting the presumptive tax as minimum tax even if a later audit shows that the taxpayer has overpaid.
Sadly, the sole objective of the FBR, constantly under pressure from its parent ministry, is to increase revenue rather than to reform the existing unfair, inequitable and anomalous tax system. This in turn accounts for annual extensions in the tax return filing deadline, sometime more than six months into the next fiscal year. It must be borne in mind that previous changes in the tax return forms did increase the number of filers but those who were not eligible to file, notably pensioners, students, housewives, began filing their returns to be eligible for lower withholding tax on purchase of services and/or goods. One would therefore urge the FBR to desist from amending a form each year and instead make it as simple as possible to lure more into filing their returns.
Rizvi categorically stated that FBR would not share third party data with Nadra authorities. This assurance is critical for providing a comfort level to a large number of businessmen, operating in the manufacturing/retail/wholesale sector, who the Khan administration considers critical to jumpstart the economy after the Covid-19 negative growth rate for last fiscal year by becoming the engine of growth.
Skeptics argue that the reason for the constant change in income tax return forms is partly attributable to the Ministry of Finance placing unrealistic targets on the Board and partly due to the frequent changes of the Chair FBR (the current Chairman is the third in less than a year and a half). One is tempted to cite Prime Minister Imran Khan's speech to the National Assembly wherein he lamented the frequent changes in the PIA chairmen as one of the key reasons for the collapse of the national airline and hope that more time, a realistic target and a free hand is given to the current chairman to bring about positive change.
Copyright Business Recorder, 2020