Pakistan is among those countries which have the lowest ratio of income tax payers to the total population. Recent statistics of the Federal Board of Revenue (FBR) show 1.42 million people who are active tax payers which is less than 1% of the total population. The Federal Government is persistently trying to enhance the tax base and this is the area consecutively addressed every year in the annual budget since 2013.

To penalise the non-submission of tax return, Finance Act 2014 introduced higher taxes for people who are not filing tax return. The Act divided tax payers into two broad categories known as filers and non-filers. Since then, every year, the net on non-filers is being tightened compelling them to become filers.

A filer, according to tax law, is a person who annually files his/her Income tax return. According to Section 2(23A) of Income Tax Ordinance 2001, filer means a taxpayer whose name appears in the active taxpayers’ list (ATL) issued by the Federal Board of Revenue.

The tax law recognises the payment of tax and submission of Tax Return as two different activities — a concept not fully conceived by many people. The payment or deduction of tax does not absolve an individual from the formal and prescribed mechanism for filing of tax return, and hence one cannot become filer unless one files his/her Tax Return. For example, tax deduction from the salary by an employer does not absolve an employee and similarly withholding tax on supply of good does not absolve a supplier to file tax return. Similarly, a person may not be required to pay tax but still he/she has to file the tax return.

The filing of annual income tax return is compulsory for people who have National Tax Number (NTN), paid tax during past two years, whose annual income is above four hundred thousand , who own flat of 2000 square feet or 250 square yards plot, who consume commercial/industrial power billed Rs. five lac or above, who own 1000 cc or above car or those who are issued notices by the Tax authority to file return.

Delay in filing tax statement attract penalty along with daily surcharge for those who are paying taxes. Failure to file tax statement is attracting fixed penalty, rendering people non-filer and exposing them to differential tax treatment in the shape of higher withholding taxes, higher vehicle registration and token taxes, higher taxes on prize bonds, higher tax on profit on investment and dividend, higher taxes on cash withdrawal from banks, higher taxes on capital gain, higher tax on sale and purchase of property and commissions, etc. Non-filer is also not entitled to claim refund of taxes paid at the time of purchase of vehicle and property from an individual who is not liable to pay taxes like a non-resident Pakistani.

More recently, the Finance Bill - 2018 goes even further by introducing ban on non-filers to purchase or import a motor vehicle. This has already been implemented and notified by local car manufacturers. The Budget 2018-19 proposed a ban on the non-filers to purchase property whose value is more than Rs. 4 million.

These coercive measures necessitate the filing of return for the people who are not required to pay tax like expatriate, non-resident Pakistani, retired employees and people whose annual earning is below the taxable threshold. Expatriate usually purchase properties in Pakistan and retired people make investment in stock exchange, saving schemes of National Saving and purchase of prize bonds. They also needed to purchase, make cash withdrawal from their bank accounts. They are and will get the treatment of Non-filer in case they don’t file.

Nowadays, due to advanced facilities of Information Technology (IT), it is not so difficult to become a filer or submit annual tax statement. FBR, in this connection has introduced many facilities that support people to easily become filer and file tax return. FBR make frequent advertisement in printed and electronic media information and educating people when and how to become a filer or file taxes return.

A person has to be registered and having National Tax Number (NTN) before submission of tax return or getting enlistment in the ATL. Registration and getting of NTN can be made by visiting website “iris.fbr.gov.pk” without visiting tax office. Similarly, facility of checking name in the ATL is now available through SMS and website. Typing ATL followed by one space and CNIC No. and SMS it to 9966 shows whether the name is available in the ATL or not. The same can also be checked by visiting website e.fbr.gov.pk.

The author is a student of PhD Management Sciences at Allama Iqbal Open University, Islamabad and associated with Pakistan Institute of Development Economics Islamabad as Treasurer.