Pakistan’s Federal Government has been working hard to broaden the country’s tax net. This was observed in the budget 2024-2025, which introduced certain regulations to improve the taxation system in the country and maximize revenue generation.
To help you understand, Pakistan’s overall tax base comprises three categories of taxpayers: Filers, Late filers, and Non-Filers. This article will primarily focus on the last category. So as per the latest development, the government has introduced a new policy of 15 heavy limits for non-filers just to increase the tax compliance of the citizens.
These restrictions include a limit on property purchases, restrictions on traveling outside Pakistan, and many others. The new policy for nonfilers and the restrictions shall be in effect from October 1, 2024.
What are Filers and Non-Filers?
According to the Pakistan Income Tax Ordinance 2001, the filers and non-files in the national Taxtations system are defined as:
Filers
Filers are the Pakistani nationals that appear on the Federal Board of Revenue (FBR) Active Tax Payers List (ATL).
Non-Filers
Non-filers are Pakistani nationals who do not appear on the Federal Board of Revenue (FBR) Active Tax Payers List (ATL) or are not registered with FBR.
How to Check Filer and Non-Filer Status
Well, you can check an individual’s filer and non-filer status or your Active Taxpayer Status simply via SMS. You need to go through the folwing steps:
- Type “ATL” (space) and enter 13 digits of your computerized National Identity Card Number (CNIC)
- Send it to 9966
To check the payer status of a company or any other entity you need to go through the following steps:
- ATL (space) 7-digit NTN number
- Send it to 9966
After checking the status, if you are a filer, you are free to go. You do not have to worry about anything except to keep on paying taxes on time!
But if the status is shown as “non-filer”, you have a lot to worry about. You will be subject to a new policy for the nonfilers that includes the following restrictions.
What is The New Policy for Non-Filers?
The new policy for non-filers, as per the budget 2024-2025, has come up with certain restrictions. The policy further comes forward as a stringent effort to eliminate the “non-filer” category from the taxation system.
According to the new policy the government has set 15 different restrictions. Out of which 5 have already been finalized and implemented. Whereas the remaining 10 shall be implemented accordingly in a gradual manner. All with the sole purpose of broadening the tax base and increasing customer compliance.
Restrictions on Non-Filers
Listed below are the total 15 restrictions applied on the” non-filers” as per the new policy 2024-2025:
- Prohibition on Purchasing property
- Prohibition on Purchasing vehicles
- Prohibition on International Travel (non-filers cannot travel outside Pakistan)
- Prohibition on opening current accounts in banks
- Prohibition on investing in mutual funds
- Prohibition on applying for loans
- Restriction on Acquiring a Business License
- Prohibition on purchasing insurance policies
- Prohibition on Importing/Exporting Goods
Deadline to File Tax Returns For Non-Filers
The deadline for filing tax returns for this year is extended to 30 Oct 2024. After extending the deadline twice this year, the government has announced the final extension.
For all the citizens, registered under the FBR taxation mechanism, the Federal Government sets a period to file tax returns right after the budget announcement or at the start of each fiscal year, usually from June, till 30th September each year.
As for the year 2024, initially, the deadline was set at 30 September 2024, later it was changed to 14 Oct 2024, but as per the latest development, the Federal Government has revised the date, i.e., 30 Oct 2024, under the Income-tax Ordinance 2001 (Section 214A).
Implications of New Policy for Non-Filers
Non-filers might be subjected to higher fines and penalties for not submitting tax returns, creating a financial burden for non-compliance. Following shall be the implications of the restrictions imposed as per the new policy for nonfilers:
Higher Withholding Taxes
Non-filers may face higher rates of withholding tax on financial transactions such as bank withdrawals property transactions, and vehicle purchases.
Property Purchase Ban
Non-filers may be restricted from purchasing immovable property above a certain value, as seen in past policies where property transactions were limited to filers only.
Higher Utility Bills
Electricity and gas utility bills may come with additional surcharges for non-filers, penalizing them for not filing taxes. They may also be restricted from accessing government subsidies such as fuel and energy subsidies.
Restriction on Bank Account Opening & Loans
Banks may not offer loans, including housing and business loans, to non-filers. Also, non-filer tax on ban transactions involves a rise in withholding tax on cash withdrawals from the banks by non-filers from 0.6% to 0.9%. They may also face hurdles when opening new bank accounts.
Travel Restrictions
International travel may be made difficult for non-filers, with additional taxes on air tickets or limitations on issuing passports or visas.
Higher Vehicle Registration Fees
Non-filers may face higher vehicle registration fees, making it more expensive for them to register cars motorcycles, or other vehicles.
Increased Capital Gains Tax
Non-filers may be subject to higher tax on property as capital gains tax on the sale of property in societies such as Capital Smart City or any other, investments, reducing their net returns.
Limit on Cash Transactions
Policies may limit cash transactions for non-filers, requiring them to engage in more traceable digital or banking transactions, thus increasing scrutiny.
Restricted Business Licenses & Stock Investments
Non-filers may not get or renew business licenses. That shall force them to become filers to operate legally. They may also face certain limitations when investing in stocks, bonds, or mutual funds.
Wrap Up!
Pakistan’s overall tax base and the ultimate revenue generation have remained low for years. Multiple successive governments have strived against the non-filers and to increase the tax base and the resulting revenue. However, the efforts have remained insufficient to bring all under the tax net. The current restrictions, centrally meant to diminish the “non-filer” label can prove to be fruitful if implemented correctly.
