ISLAMABAD: Federal Board of Revenue (FBR) Chairman Amjad Zubair Tiwana on Saturday clarified that there had been no immediate travel restrictions on non-filers as proposed in the federal budget presented by the government for the next fiscal year on June 12, stating that a prior notice and inclusion in the Income General Tax Order would be pre-requisite for such an action.

This clarification was given by the FBR chairman before the Senate Standing Committee on Finance and Revenue which was presided over by Senator Saleem Mandviwala of the Pakistan Peoples Party (PPP), according to an official handout issued by the Senate Secretariat.

This was the fifth session of the committee which had been meeting to meticulously scrutinise the provisions of the Income Tax Ordinance 2001 as outlined in Clause 6 of the Finance Bill 2024.

The FBR chairman clarified that the requirement to link NTN [National Tax Number] with passports for international travel would apply only after due notice and inclusion in the income tax general order, dispelling public concerns regarding immediate travel restrictions.

It may be mentioned that while announcing the federal budget, the government had proposed a series of measures to punish individuals and businesses who do not file income tax returns, including the possibility of being barred from foreign travel. The measures appeared to be another attempt by the government to coerce non-filers into filing their tax returns for the documentation of the economy.

In his speech on the floor of the National Assembly on June 12, Finance Minister Muhammad Aurangzeb had said the government aimed to increase the tax base and widen the tax-to-GDP ratio through these measures.

The finance bill has proposed amendments to Section 114B of the Income Tax Ordinance, 2001 to stop non-filers from travelling abroad.

The sub clause 2 of the said section already empowered the FBR to disable mobile phone SIMs and cut electricity and gas connections of non-filers.

“[A] citizen of Pakistan” who is liable to file tax returns but doesn’t do so can be stopped from travelling abroad if the proposal is passed by the parliament.

The implementing agencies will be slapped with a penalty of Rs100m, if they defy the orders to take any of the three punitive actions. The penalty will go up by Rs200m for every subsequent defiance.

The committee members were also apprised about the introduction of a new category termed “late filer” under the Income Tax Ordinance, targeting individuals who sporadically file returns without consistent adherence. The committee underscored the need to impose stricter penalties, proposing a 10 per cent tax levy and withdrawal of previous concessions.

Furthermore, the committee members also deliberated on advertising expenses related to brand royalties, expressing reservations on proposed clauses affecting local investors and ownership control thresholds.

In response to queries regarding income tax on imports, the committee members expressed astonishment over proposed methods for determining minimum taxable values, advocating for customs evaluations as the standard practice. The committee gave reservations and deferred the amendments for further review alongside sales tax amendments. Similarly, proposals regarding property tax extensions for ex-Fata and ex-Pata were postponed, pending reconsideration.

The committee also addressed concerns regarding 18 per cent GST (General Sales Tax) levies on packaging items and locally processed milk products, advocating for reductions to alleviate consumer burdens, particularly on essential items such as infant formula.

In a notable exchange, PPP Senator Sherry Rehman emphasised equitable tax distribution among corporations, advocating against shifting tax burdens onto consumers for products like formula milk.

The committee meeting was attended Sherry Rehman, Mohsin Aziz, Anusha Rahman, Ahmad Khan, Shahzab Durrani, Farooq Naek, Shibli Faraz and Munzoor Ahmed Kakar.

Published in Dawn, June 16th, 2024