Number of return filers increases to 1.24 million till August 27
KARACHI: Number of annual income tax return filers increased 16 percent to more than 1.24 million till August 27 due to efforts of tax machinery and higher withholding tax rates for non-compliant taxpayers, an official document showed.
The number of return filers for the tax year 2015 stood at 1.07 million till the similar period last year.
Tax officials said annual returns for tax year 2016 would take a boost by March 2018 when active taxpayers list (ATL) 2017 would be issued.
The officials said return filers for the tax year 2016 can avail the reduced rate of withholding tax rates during the current fiscal year till the issuance of new ATL. They said the number would also increase if a dedicated directorate for broadening the tax base is established as per the budget proposal of the last year.
Tax directory for tax year 2015 showed that more than half of the corporate taxpayers were non-compliant.
FBR has begun an aggressive drive to encourage returns filing. It slaps additional withholding tax on non-cash banking transactions to broaden taxpayers’ base.
Besides, the revenue body obtained a record of 2.9 million industrial and commercial electricity connection holders, who are required to file annual returns. Likewise, one million individuals, in the salary class, have been identified as non-filers despite having taxable income. The government, in the budget for 2015/16 fiscal year, imposed withholding tax rate of 0.6 percent on non-filers while they make non-cash banking transaction above Rs50,000 in a day. The rate was reduced to 0.3 percent on July 15, 2015, but edged up to 0.4 percent in March 2016. The tax rate is applicable till September.
The State Bank of Pakistan (SBP), however, said the use of cash would further increase due to imposition of withholding tax on non-cash banking transactions.
“Not only would these developments constrain future tax collection, these may also undermine financial inclusion efforts of the government and SBP,” it said in a report.
There was a rise in purchase of higher denomination of prize bonds to avoid withholding tax rate. Businesses were using higher denomination prize bonds to settle their transactions instead of using banking instruments like demand drafts and cheques, said the central bank.
“This is the major reason why the increase was more pronounced for larger denomination bonds, including Rs40,000 and Rs25,000. Hence, higher investments in prize bonds have come at the expense of bank deposit growth.”