ISLAMABAD: The Federal Board of Revenue (FBR), as part of its assurance to the IMF to bring 100,000 rich people under the tax net each year, sent notices to over 120,350 people during 2013-14, but only 17,314 (15pc) got registered on a voluntary basis.

The tax collected from these people with the returns was Rs306 million.

One reason cited by the tax officials for the poor tax compliance was the introduction of the functional tax system instead of the earlier circle based system.

FBR spokesman Shahid Hussain Asad said tax authority has issued more than 120,000 initial notices under section 114 of the Income Tax Ordinance 2001 based on large potential fiscal liabilities and location to ensure the initiative was nationwide.

Asad said more than 38,413 second notices under section 122C were also issued which were to be followed by provisional assessment, collection procedures, and penal and prosecution proceedings.

The spokesperson said that provisional tax assessment under section 122 of the law has been made in more than 28,690 cases. Against the provisional assessment order passed, a demand of Rs11 billion has also been created.

New policy measures taken through Finance Act 2014 to broaden the tax base include a new regime in which different rates of withholding income tax for return filers and non-filers on certain transactions have been introduced, he said.

This includes sale and purchase of immovable property, purchase, registration and transfer of ownership of motor vehicles, cash withdrawal from banks, and payment of profit on debt and dividend income, he added.

He said the higher rates for non-filers will not only provide an incentive to non-filers and declare their income from all sources, but also provide a database to the FBR to identify potential taxpayers to broaden tax base.

Published in Dawn, July 26th, 2014