Pakistan tax bodies seek another extension to filing deadline

The bodies of Pakistan’s taxation lawyers and accountants have sought another extension in the date of filing tax returns to allow more time to citizens using digital filing platforms for the first time.

The date for filing tax returns starts after the close of the financial year on June 30 and runs till September 30.

Last month, the Federal Board of Revenue (FBR) extended the date by 15 days on the request of various trade bodies, tax bar associations, and the public. The deadline is set to expire on October 15.

The tax returns are key to documenting the economy and assessing the accurate wealth of individuals. However, Pakistan has struggled with increasing the number of filers, with only around 5-8 million of its over 240 million population filing the returns.

During the last fiscal year, only 7.6 million returns were filed.

The country’s tax-to-GDP ratio has remained stagnant around 9-10pc for years, resulting in chronic budget deficits which force the government to borrow money.

Over the years, the authorities have tried multiple methods, including innovation and coercion, to stimulate tax filings, but the progress remained elusive due to lax enforcement mechanisms.

Recently, the FBR introduced simplified tax returns for salaried individuals to help them file the returns easily.

In separate letters to the finance minister, two bodies of tax professionals and accountants have sought an extension to the tax filing deadline.

The Pakistan Tax Bar Association said the population was unfamiliar with these digital tools and needed time to file the returns.

The body said it had been calling for the use of technology for documentation since “it is the only way forward to enhance the tax to GDP ratio and the tax base”.

The letter added that due to the convenience of digital methods, more people are either willing to file tax returns or amend existing records with proper disclosure and wealth declaration.

It said to allow people more time to file their returns, the deadline must be extended for at least 30 days to November 15.

Separately, the Karachi Tax Bar Association (KTBA) said there were a number of issues with the FBR's online tax filing platform, which must be fixed for accurate tax filings.

It pointed out issues like additional surcharges on taxed income, non-adjustment of preceding years' refund claim, inclusion of irrelevant clauses of taxation laws which are "creating substantial obstacles for taxpayers" trying to file the returns.

The association also pointed out a legal anomaly as Section 118 of the Income Tax Ordinance, 2001, allows a taxpayer 92 days from the date when the final return form was notified by the FBR.

The KTBA claimed this year, the final return form was notified on August 18, leaving only 43 days for taxpayers to file their returns by September 30. Even after the 15-day extension, the total number of days comes to 58, less than the legally mandated deadline of 92 days.

KTBA claimed these issues have "created an impractical situation for a vast number of taxpayers".

New measures

Over the past few months, Pakistan has enforced a number of measures to increase tax collection as part of the commitment given to the International Monetary Fund (IMF) to secure a $7 billion loan.

Recently, the FBR has set up a Social Media Lifestyle Monitoring Team to identify individuals showcasing luxury lifestyles, including expensive vehicles, designer clothes, lavish homes, yachts, and jewelry, online without submitting their tax declarations.

According to sources, the revenue collection body has completed the profiling of these individuals, with assistance from the national registration body. The profiles included information about credit and ATM card activity, spending patterns, and records of international travel.