Filing returns!

The FBR gave in and extended the tax submission deadline by 15 days as reports of the system choking grew on the last 2 days. In recent years, tax filing date became a joke with so many extensions. This time around, FBR tried to stand its ground to not extend the date, but had to give in owing to its system constraints. The question is, whether 90 days given to file returns is enough in a country where filers are too low relative to the potential.

In UK, the tax year end in March and the filing is allowed till January, while in Canada the filing time is nine months. Then the filing is easy with better documentations and systems interoperability, and there is no need to file wealth returns in those countries. It is a debate worth having whether keeping 90 days to file in Pakistan, where the processes are cumbersome and tax paying culture is not inculcated, justifiable.

The FBR should revisit its tax filing process. Filing systems must be swift and easy with enough server capacity to withstand load. There are so many direct taxes in indirect form where even a salaried or consultant must go through painstaking processes to extract data from various sources and reconcile with the FBR filing process and to update wealth statement by even incorporating buying like furniture in the last year.

Information gathering takes time. There is some information that comes in 60 days or so. The basic bank statement including withholding tax deduction is provided by a better bank through email in Mid-September. While some banks ask for branch visit to get it as their online systems are either not available or in horrible state. NCCPL tax report came by August end. Then you need to get certificates on phone, kids’ education fee and a few other sources. Think of the life of a small business. Wouldn’t they prefer to remain a non-filer given all the hassle around filing?

Last year, 2.9 million persons filed tax returns in a country of 220 million. The successive governments are using carrot and stick approach for people to file; but they keep on shying away. FBR keeps on asking the filers to give their due share, but they keep on siphoning part of the income out of the documented net. Then every now and then an amnesty scheme comes for them to wash hands clean and then get back again to the dirty laundering. Now traders and retailers are demanding amnesty before coming to the FBR POS system.

The vicious cycle continues. Merely by acting like a principled institution on filing time while ignoring officers being hands and gloves with non-filers doesn’t cut right for the FBR. The filing of wealth statement is a difficult task and unwarranted. Think about the process of compiling and filing wealth statement for the very first time. Marginal filer would opt not to just in fear of filing the wealth statement.

At some instances, FBR provides information. One can extract withholding tax cut against their name, but the person has to extract the data and put it into the other system. The two portals should talk to each other and should be synced which would make it easier for fling to get the marginal filer. FBR is doing a decent media campaign with attractive celebrities pushing for filing. It’s good, but to get better results, FBR should give ample time to file and make it as simple as it can.