Sources told Business Recorder here on Monday that the FBR has given a presentation to Finance Minister Asad Umar on income tax returns during his last visit to the FBR House. The FBR has proposed the finance minister that the simplified return form may be introduced after simplification of tax laws.
According to the FBR, the number of returns filed in the tax year 2012 was 835,924 which increased to 1,577,964 in the tax year 2017. The tax law and consequently return form became more complex every year but the number of returns filed has increased. The increase in filing is due to penalty in the form of higher tax rates for non-filers introduced in TY 2014 and probability of being caught due to data available in withholding statements.
The Federal Board of Revenue (FBR) has received 482,275 income tax returns till October 10 for the tax year 2018, which are 170,208 more than 312,067 income tax returns received for tax year 2017 by the same date, registering an impressive increase of 55%.
This year, the FBR is expecting over 1.5 million income tax returns, sources said. The increase in tax returns is due to new tax measures such as restriction on purchase on non-filers and the provision that persons who file return after the due date would be considered as non-filers, the FBR said.
Sources said if the new return forms are available for filing by mid to end November 2018, then at least two months would have to be given to taxpayers for filing returns. Such kind of possible delay in receipt of returns would have negative impact on revenue collection during 2018-19.
If the returns for the tax year 2018 will be filed on two different formats, it would lead to different problems including litigation. For example, for the 500,000 returns filed on old format, meaningful data is available for audit selection. This would be perceived as discriminatory by filers on existing format and may lead to litigation when cases are selected for audit.
Moreover, the simplified return would not result in selection of cases for audit. At the same time, applying risk parameters and analytic tools on data available in simplified returns would not be possible for the FBR.
As return form is basically a reflection of tax law, complexity of tax law needs to be addressed at the first stage. The FBR is initiating the process of simplification of tax law shortly for the next financial year. After simplification of tax law, simplified return form may be introduced for tax Year, sources added.
The policymakers and budget-makers are suggesting that income tax return form must be simplified and should not be more than one pager for salaried and small taxpayers. The form should also be made available in Urdu.