In a bold move to overhaul Pakistan’s tax system, the Federal Board of Revenue (FBR) has announced plans to abolish the concept of non-filers of income tax returns. This initiative aims to transform the cash economy into a documented one and address the significant tax gap of Rs. 7.1 trillion.
FBR Chairman Rashid Mahmood Langrial presented the reform measures to leading business and trade groups at the FBR Headquarters. The meeting, attended by State Minister for Finance and Revenue Ali Pervez and senior tax officials, outlined the government’s strategy to eliminate non-filers and enhance tax compliance.
“The concept of non-filers will be completely removed from our tax laws,” stated Chairman Langrial. “Non-filers will no longer exist in our records, and we are committed to ensuring that all financial transactions are documented.”
The government plans to abolish the category of non-filers and restrict the use of cheques for cash withdrawals beyond a certain threshold. Previously, the focus was on banning asset purchases by non-filers, but the new approach involves deleting the definitions of non-filers and removing the 10th schedule from the Income Tax Ordinance.
Chairman Langrial emphasized the urgency of these reforms, warning that without them, it would be impossible for the government to collect taxes effectively. The FBR aims to increase the tax-to-GDP ratio by reducing the burden on existing taxpayers and creating disincentives for non-compliance.
High tax rates have already driven some enterprises, such as those in the textile industry, to consider relocating outside Pakistan. The FBR is also concerned about the impact of high taxes on the salaried class, which could lead to a brain drain of highly skilled individuals.
To encourage compliance, the FBR will link the availability of facilities such as investments and bank account creation to the filing of tax returns. Monetary transactions will require verification of the source through digital means, and property transactions will be categorized as eligible or ineligible based on tax compliance.
A presentation slide revealed that taxpayers will be categorized based on their declared income, affecting their ability to purchase vehicles, properties, and make investments. The reforms will also include a cap on cash cheque issuance, with banks required to report any transactions exceeding specified limits to the FBR.
