Source: Bloomberg

In an effort to strengthen tax enforcement, the federal government of Pakistan is contemplating stringent measures against non-filers. Among these measures is a proposal to bar individuals who do not file their income tax returns from traveling abroad. This initiative aims to compel compliance and increase the number of active taxpayers.

Current Penalties for Non-Filers

Presently, the government employs several penalties for individuals who remain non-filers despite receiving notices. These measures include the disabling of mobile phone SIMs and the discontinuation of utility connections. Such actions are designed to increase the inconvenience for non-compliant individuals and encourage them to file their tax returns.

Source: Arab News

In April, the Federal Board of Revenue (FBR) issued an Income Tax General Order (ITGO) to disable the mobile phone SIMs of over 0.5 million individuals. These people, though liable to file their Income Tax Return for Tax Year 2023, were not listed as active taxpayers. This move marked a significant step in the government’s efforts to enforce tax compliance.

Proposed Travel Ban for Non-Filers

To further escalate the consequences of non-compliance, the government is now considering barring non-filers from leaving the country. This proposal aims to make non-compliance more costly and inconvenient, thereby compelling more individuals to file their tax returns. However, the proposal includes exceptions for individuals traveling for religious pilgrimages, such as Umrah and Hajj, as well as for minors and students.

Source: FBR

The proposal has sparked mixed reactions among the public. Some critics argue that such measures are excessive and may not effectively increase the tax base. They suggest that reducing tax rates to a more manageable level, similar to practices in other countries, might encourage more people to register and pay taxes voluntarily. For instance, a commenter stated, “This is not the way to increase the tax base. The only way is to follow what other countries did by reducing taxes. If tax is 1% to 5%, automatically everyone will register and start paying.”

The government’s consideration of a travel ban for non-filers reflects its determination to enhance tax enforcement and compliance. While the proposed measures are stringent, they underscore the urgent need to broaden the tax base and ensure that all liable individuals contribute to the national revenue. Whether this approach will be effective or if alternative methods like tax rate reductions should be explored remains a topic of public debate.

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Usman Kashmirwala
Your thoughts are your biggest asset in this world and as a content writer, you get a chance to pen down these thoughts and make them eternal. I am Usman Kashmirwala, apart from being a movie maniac, car geek and a secret singer, I am a guy lucky enough to be working in a profession that allows me to showcase my opinions and vision to the world every day and do my little part in making it a better place for all of us.