ISLAMABAD: The Federal Board of Revenue (FBR) has claimed that nearly 50,000 individuals filed their returns for the tax year 2023 after their mobile SIMs were blocked and retailers were registered as part of an effort to broaden the tax base.

To enforce tax laws, the government has implemented a new regulation that permits blocking mobile SIMs and requires retailers to register under the Tajir Dost Scheme (TDS). This move aims to enable the suspension of cellular services for individuals who do not adhere to the country’s tax regulations.

Since May 14, the FBR has sent around 165,000 CNICs of non-filers to three major telecom companies — Telenor, Ufone and Jazz — to block their SIM cards. The FBR did not have information about the number of SIM cards issued to 165,000 non-filers.

A senior tax official told Dawn that the tax department had received 41,991 more income tax returns for tax year 2023. The official added that the FBR shared CNIC data with the telecom service providers in 33 batches of 5,000 each.

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The SIMs of 165,000 non-filers were activated after they filed their returns and confirmation by the tax department.

On April 10, the telecom operators agreed with the FBR to initiate the manual blocking process in small batches. On May 14, the first batch, comprising 5,000 non-filers, was communicated to the telecom operators for compliance. Since then, 33 batches of data have been shared with the telecom companies.

In the Finance Bill 2024, the government has introduced heavy penalties for those telecom operators who will not comply with the FBR order.

While the three companies started blocking the SIMs, a fourth firm—Zong—had moved the Islamabad High Court against Income Tax General Order No 1 (ITGO-No1), seeking a stay on its implementation.

On April 30, the FBR released a comprehensive list of 506,671 individuals who failed to file their tax returns for 2023. The FBR has identified 2.4 million potential taxpayers who did not exist on the tax rolls. Notices were subsequently issued to these individuals.

Retailers’ registration

The FBR has claimed that retailers’ registration reached 34,615 in six major cities during the drive as part of documentation.

The voluntary registration incentivised traders and wholesalers to register into the tax framework by the April 30 deadline. However, less than 100 were enrolled under the scheme. Since May 1, tax officials have begun communicating with retailers to encourage them to register.

According to the official data, more than 1,000 traders have been registered in the tax system daily in the past few weeks.

The breakdown indicated that Lahore had the most traders registered under the TDS, with 12,651 followed by 6,455 in Karachi, 4,786 in Rawalpindi, 3,126 in Islamabad, 3,010 in Peshawar, and 1,988 in Quetta.

Besides this, 5,803 retailers have filed their tax returns and registered under the scheme.

Only 300,000 of an estimated 3.5 million retailers are actively filing tax returns. The newly proposed scheme aims to bring the remaining 3.2m retailers in major cities into the tax net.

Despite contributing 18pc to the gross domestic product, the tax contribution of the retail and wholesale sectors stands at a mere 4pc. The government has been striving for years to incorporate this sector into the tax net effectively.

Published in Dawn, June 26th, 2024