Alert Sign Dear reader, online ads enable us to deliver the journalism you value. Please support us by taking a moment to turn off Adblock on

Alert Sign Dear reader, please upgrade to the latest version of IE to have a better reading experience


Will it widen the net?: Proposed tax amendment

August 13, 2013

THE Federal Board of Revenue is contemplating certain amendments to the income tax return forms for the tax year 2013. The proposed alterations in the form have been necessitated by the various changes made in income tax laws in the budget for the present year. The most important amendment makes it mandatory for all salaried and non-salaried taxpayers to file their returns and wealth statements irrespective of the size of their incomes and value of their assets. The altered laws do away with the exemption threshold for the purpose of filing returns. The objective is to document the economy and bring more people into the net to expand it to collect more revenue. Given the existing narrow tax net — in tax year 2012 a little over 0.8 million people filed their tax returns — the proposed amendment is an important step towards documenting the economy. But will it produce the desired results?

Tax experts agree that poor awareness about the benefits of filing returns and the fear of coming into contact with a corrupt tax machinery keep even honest taxpayers from disclosing their true income and filing their returns. On top of that, not everyone can fill the complicated tax form and need ‘professional’ help. If ‘voluntary compliance’ of tax laws is to be encouraged, the FBR will have to bring transparency into its operations and make the procedures easier. Besides, it must set up service centres to facilitate taxpayers in filing their returns. More importantly, it needs to inform and explain to the people clearly as to what constitutes their taxable income and where they can claim refund of taxes on income paid in an indirect mode. Unless the FBR takes the necessary steps to facilitate the taxpayers, it should forget about expanding the base.