Returns filing inches up to 2.63 million in two months

KARACHI: Number of returns for the current tax year ratcheted up 100,000 to 2.63 million in almost two months as the filing slowed down due to the coronavirus lockdown that started to ease now, official data showed on Monday.

The filing belongs to the tax year 2019 according to active taxpayers list (ATL) up to April 26, 2020. Number of return filers stood at 2.53 million up to March 1, 2020.

The Federal Board of Revenue (FBR) issues ATL updating the names of those taxpayers filing their income tax returns. The appearance of name on the ATL guarantees the deduction of lower rate of withholding tax.

FBR sources said the filing of income tax returns slowed down due to halt of business and commercial activities after outbreak of coronavirus.

The source said the tax authorities were estimating the return filing at around 4 million for tax year 2019. However, the lockdown imposed to prevent coronavirus pandemic adversely affected the return filing.

The lockdown was imposed on March 23 and now the government decided to continue it till May 9, 2020, which may be extended considering the condition of the pandemic.

As per the ATL updated on March 22, 2020, the FBR received 2.59 returns. Therefore, the tax authorities received around 30,000 returns during lockdown period (35 days). The sources said in normal conditions the FBR was receiving around 20,000 returns in average per week.

The sources said as per law it is mandatory for individual to file annual returns in order to avail reduced rates of withholding tax on certain transactions. However, a person is required to pay surcharge and late penalty for filing return after due date in order to appear on ATL. The sources said changes in law through Finance Act, 2019 were also compelling taxpayers to file their returns. Through Finance Act, 2019, Tenth Schedule was inserted to Income Tax Ordinance, 2001 under which a person not appearing on the ATL would be liable to pay 100 percent additional withholding tax while making certain transactions. Prior to this change, people not filing income tax returns were liable to pay enhanced rate of withholding tax.

Previously, the law provides for the concept of a non-filer and stipulates higher withholding rates for the same, which were adjustable at the time of filing of income tax return.

The sources said such a tax regime created a misconception that a non-filer could go scot free by choosing not to file income tax returns. The measure was meant to increase the number of filers, however over time the focus was shifted to raising additional revenue only. The measure did not achieve the desired results as the regime did not provide any legal framework to ensure filing of returns by such non-filers. In order to remove the misconception, the concept and the term of ‘non-filer’ was abolished from the statute.