Government has recently decided to end the old concept of non-filers to convert into active taxpayers through the introduction of a new legal regime. PTI government is all set to announce a new policy in the upcoming budget.
The goal behind this new legal system is to increase the existing Income Tax Filers to four million. This will levy an additional Rs.688 billion taxes from July 2019 onwards.
Under this new policy, the government has decided to immediately start legal proceedings against those who are not part of Active Taxpayer List (ATL) but they still undergo cash and banking transactions. Before that higher Income Tax rates were charged from those who do not file their statements of assets and income.
Currently, in Pakistan there are less than 2 million people who submit their Income and wealth statement to Federal Board of Revenue (FBR) and they are part of Active Taxpayer List (ATL).
FBR has decided to overcome this issue by introducing the 10th Schedule in the Income Tax Ordinance 2001 which comprises of two major components. Under this Schedule, Withholding Tax section will attract 100% higher tax in comparison to those who are income tax return filers.
This section demands a withholding agent who will be appointed to convey the information of non-filers to FBR so that a tax demand will send to these people who have concealed income.
Moreover, the withholding agent will also be bound to trace all the information of that individual along with the Computerized Identity Card (CNIC) number.
All the cases are part of 10th Schedule except those where income is fixed, the business transactions are known or it cannot be outside the formal economy.
Government has also decided to end almost 20 withholding tax sections which are not beneficial for the economy in revenue perspective.
The FBR has a task to collect around Rs.5.55 trillion taxes during the fiscal year 2019-20 which will hit an additional taxes of amount Rs.688 billion.