ISLAMABAD: The Tax Laws Amendment Bill 2024 tabled by Minister for Finance and Revenues Mohammad Aurangzeb in the Parliament has proposed doing away with the category of non-filers for specified sectors which might prove as major stumbling block in the way for collecting increased revenues at exorbitant rates.
Top official sources told The News on Monday that for the category of non-filers, the FBR had jacked up tax rates by 200 and 300 percent in the budget for 2024-25, but abolishing this category for certain sectors may negatively impact revenue collection.
Amid facing severe revenue shortfall, which is also expected to happen in current month, the government may achieve a “breakthrough” in the ongoing negotiations among Deputy Prime Minister Ishaq Dar-led committee and banks within next few days resulting into paying increased tax amount from banking sector during the ongoing month.
The breakthrough might decrease the revenue shortfall to the tune of Rs50 billion during December, otherwise revenue shortfall might go close to Rs490 to 500 billion in the first half. However, with approval of Tax Laws Amendment Bill 2024 from the Parliament, the existing practice of collecting increased rate of taxes from non-filers was proposed to be abandoned, so in the short term, the revenue collection might face losses.
Although, the Federal Board of Revenue (FBR) had proposed stern actions against the non-filers, both in income tax and sales tax, including slapping ban on purchasing property, over 800 cc new cars and investing into securities and mutual funds etc, it would have to follow law for creating tax demand. This legal path would require several months at a time when the FBR is bound to collect taxes on daily, weekly and monthly basis for achieving the Rs12.97 trillion target.
Currently, the number of sales tax (ST) registration stood at 367,000 during the current fiscal year against 337,000 till end of June 2024. The number of registered ST increased by almost 40,000. In the medium- to long-term basis, the proposed tax laws might help the FBR to introduce the culture of tax compliance but it might not resolve the current problem of revenue shortfall.
The exact amount of shortfall would be known after December 25 as the corporate sector returns are due till December 31, so the FBR would continue its efforts to maximise collection but the revenue shortfall would exceed beyond Rs340 billion by at least, adding another Rs100 billion shortfall.
The government has so far ruled out the possibility of any mini budget during the ongoing fiscal year but it would have to do something before International Monetary Fund (IMF) review mission visits Islamabad in mid of February 2025.
When this correspondent contacted FBR high-ups, they said that the non-filer category was proposed to be abolished for certain areas through the proposed Tax Laws Amendments bill 2024 and conceded that it might cause losses in revenues. The revenue collector would have to take some drastic steps in shape of reforms, they added.
To another query, a top official said that the Dar-led committee is scheduled to hold a meeting on Tuesday (today) but they could not predict anything about its outcome at this stage.
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