The government on Wednesday tabled a bill in the National Assembly seeking to enforce compliance with tax laws by introducing significant penalties for individuals who fail to submit their annual tax returns as per law.
Introduced by Finance Minister Muhammad Aurangzeb, the Tax Laws (Amendment) Act, 2024 seeks to amend several tax-related laws, including the Sales Tax Act, 1990; the ICT (Tax on Service) Ordinance, 2001; and the Income Tax Ordinance, 2001. The proposed legislation calls for ending the existing categories of filers, non-filers and late filers, replacing them with ‘eligible’ and ‘ineligible’ persons.
Under the bill, an ‘eligible’ person is anyone who has filed their most recent income tax return and declared sufficient resources in their wealth statements or financial statements. It also calls for the ‘eligible’ person to submit details of their family members—parents; spouses; sons below the age of 25; unmarried, divorced or widowed daughters; and children with disabilities.
The bill has proposed several restrictions economic transactions of ‘ineligible’ persons. They will be barred from purchasing any vehicle over 800cc, with authorities directed to not entertain any applications for booking, purchase of registration of such vehicles. Similarly, the Federal Board of Revenue has restricted the registration, recording, attestation and transfer of any immovable property whose value exceeds a value notified by the tax authority.
The proposed legislation also seeks restrictions on authorized individuals from selling securities, including debt securities or mutual funds, to ineligible persons.
The FBR would periodically notify persons who are ineligible to open bank accounts, with banks barring such individuals from withdrawing cash in already opened accounts beyond a certain limit that would be notified by the tax body. The bill similarly requires banks to report high-risk individuals engaging in financial activities beyond their declared assets and turnover.
The amendments to the ICT (Tax on Service) Ordinance, 2001 call for the FBR to install point-of-sale devices in the federal capital to collect sales tax on all taxable services. The proposed bill also allows tax authorities to hire auditors and experts on a contractual basis for audits, investigations, litigation and valuation purposes.
Penalties
Under the proposed bill, tax commissioners would have the authority to seal businesses, seize assets and suspend bank accounts of businesses that fail to register for sales tax. These measures would be lifted within two days of registration, with an option for appeals with the FBR Inland Revenue chief commissioner within 30 days.
The bill further calls for fines on goods sold without proper tax stamps, stickers or barcodes. For industries exploiting input tax adjustments, the FBR would utilize an automated risk management system to flag questionable claims.