Federal Board of Revenue has rejected claims of reduction in the number of Income Tax returns filed for the current year as compared with the last year. Certain news reports and opinions appearing in the print and electronic media on the subject have pointed out that the returns received by the FBR for the current year ie tax year 2016 are above one million whereas the returns received for the tax year were above 1.2 million and hence there is a decline of around two hundred thousand in the number of returns received this year.
FBR has termed the above referred reports and opinions as misleading and based on a lack of understanding of the return filing cycle. It needs to be understood that there is no cut-off date for filing of Income Tax returns. Income Tax law does provide a due date for filing of returns but the taxpayers are allowed to file their returns after the lapse of the due date and sometimes file their returns for a tax year several years after the end of the tax year. A meaningful comparison of the number of returns filed for a year with the preceding year has to be for a given date because the returns for the preceding year continue to be filed even in the next year.
By today the 9th of March 2017 FBR has received 1,039,291 returns that are 172.097 more than the 867,194 returns received for the tax year 2015 by the same date ie 9th of March 2016. Returns for tax year 2015 continued to be filed after this date and by 30th June 2016 the number of returns received became 1,028,611 and 1,202,634 by 9th of March 2017. It is therefore obvious that the figures being presented to the public by the sections of the print and electronic media do not compare apples to apples and are misleading.
Federal Board of Revenue for the information of the critics and the public at large would like to explain the reasons for the trend of return filing observed for the last year ie tax year 2015. The Government has introduced a scheme of differential taxation under which the non-filers of returns are subjected to a higher rate of withholding taxes on various economic transactions. This scheme was introduced as a step to create a disincentive for the non-filers by increasing their cost of doing business through higher taxation. The scheme has yielded results and the number of return filers has increased substantially over a period of three years under the present government. In order to implement this scheme FBR issues an Active Taxpayers List that is available on its website and the withholding agents are required to use this list to determine the status of filing of return by an individual or an entity so that the appropriate rate of withholding tax can be applied.
Income tax rules provide that the Active Taxpayer List on the basis of returns for the latest tax period is to be issued on the first day of March following the due date of filing of returns for that tax period. Prior to the first of March the Active taxpayers List is maintained on the basis of return filed for the last tax year and not the current tax year for which the return became due. Therefore, up to the 1st of March 2017 when the Active Taxpayers List was being maintained on the basis of returns filed for the tax year 2015 the taxpayers wishing to get their names included in the Active Taxpayers List had an incentive to file the returns filed for the tax year 2015 rather than for the tax year 2016. That explains the phenomenon of receipt of a large number of returns after the due date of returns for the tax year 2015 and even after the becoming due of the returns for tax year 2016.
With effect from 1st of March 2017 the basis for including the name of a taxpayer in the Active Taxpayers List has been changed from the returns for tax year 2015 to the returns for tax year 2016 and FBR expects and anticipates that in the coming days the taxpayers becoming cognizant of the change in Active Taxpayer List will start filing returns for the tax year 2016 in large numbers. Comparison of returns filed to date inspires confidence that the number of returns filed for the tax year 2016 will be substantially higher than the number of returns filed for tax year 2015. FBR is also devoting great attention to broadening of the tax network by utilising the data of significant economic transactions available with it and the field offices have also been given targets in this regard. FBR also wishes to remind the critics that the returns for the tax year 2015 were also received by it due to its policy and administrative initiatives and the gains in this regard will not only be consolidated but also expanded.-PR
Copyright Business Recorder, 2017