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ISLAMABAD: The government is reviewing the powers of the National Database and Registration Authority (NADRA) in the budget (2023-24) for determining the indicative income and tax liability of unregistered persons and non-filers to broaden the tax base.

Sources told Business Recorder that the Federal Board of Revenue (FBR) is examining the proposal to retain or revise the powers of NADRA under the Income Tax Ordinance 2001 through the Finance Bill 2023. In this regard, the FBR has received a budget proposal.

So far, the joint collaboration of the FBR and the NADRA has not achieved the desired results. A review of section 175B (powers of NADRA to assess and recover income tax from non-filers) of the Income Tax Ordinance is under way. Under this section, the authority has ample powers to take all kinds of actions against the non-filers of income tax returns.

FBR considering documenting non-filers’ property deals

If the FBR proposes the abolition of section 175B (powers of NADRA to assess and recover income tax from non-filers) of the Income Tax Ordinance through Finance Bill 2023, another provision may be introduced in the Income Tax Ordinance 2001, sources said.

Subsequent to any changes in section 175B from the Income Tax Ordinance, the FBR can propose a new provision (section 175C) for the formation of real-time national integrated database which may be controlled by the State Bank of Pakistan (SBP) or FBR where all data including banking transactions may be analysed by artificial intelligence (AI) on the basis of tax declaration and non-compliant taxpayers may be nudged to revise their returns. In case of failure to revise income or to file correct incomes, the information may be made available to FBR for necessary action, the proposal added.

Under section 175B, the NADRA shall, on its own motion or upon application by the board, share its records and any information available or held by it, with the board, for broadening of the tax base or carrying out the purposes of the Income Tax Ordinance.

The NADRA may (i) submit proposals and information to the Board with a view to broadening the tax base; (ii) identify in relation to any person, whether a taxpayer or not – (a) income, receipts, assets, properties, liabilities, expenditures, or transactions that have escaped assessment or are under-assessed or have been assessed at a low rate, or have been subjected to excessive relief or refund or have been mis-declared or misclassified under a particular head of income or otherwise; (b) the value of anything mentioned in sub-clause (a) of clause (ii), if such value is at variance with the value notified by the Board or the district authorities, as the case may be, or if no such value has been notified the true or market value; and (iii) enter into a memorandum of understanding with the Board for a secure exchange and utilization of a person’s information.

The board may use and utilise any information communicated to it by the NADRA and forward such information to an income tax authority having jurisdiction in relation to the subject matter regarding the information, who may utilise the information for the purposes of the ordinance.

The NADRA may compute indicative income and tax liability of anyone by use of artificial intelligence, mathematical or statistical modelling or any other modern device or calculation method.

The indicative income and tax liability computed by the NADRA shall be notified by the Board to the person in respect of whom such indicative income and tax liability has been determined, who shall have the option to pay the determined amount on such terms, conditions, instalments, discounts, reprieves pertaining to penalty and default surcharge, and time limits that may be prescribed by the board.

Copyright Business Recorder, 2023


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