FBR weighs ‘heavy’ penalty on noncompliance

May 24, 2020

KARACHI: The Federal Board of Revenue is weighing the potential impact of whopping nine-time increase in fine and penalty on violation of tax laws, proposed by its professional team members, as it...

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KARACHI: The Federal Board of Revenue (FBR) is weighing the potential impact of whopping nine-time increase in fine and penalty on violation of tax laws, proposed by its professional team members, as it braces to improve revenue collection amid economic contraction, sources said on Saturday.

The sources said the tax offices proposed the authorities to increase fine and penalties to Rs50,000 from existing Rs5,000 under Section 182 of Income Tax Ordinance, 2001.

Sources in the FBR said tax offices recommended substantial increase in fine and penalties from the next fiscal year in order to ensure compliance to the tax laws. Tax managers recommended nine-time increase in fine and penalty for violating any provision of income tax law, they said.

The sources said penalty for violating most of the provisions of Income Tax Ordinance, 2001 has been prescribed. However, the tax managers recommended the monetary penalty with regards to the provisions where penal amount is not prescribed.

The sources said many taxpayers are indulged in taking advantage and avoid compliance due to existing lower penal amount.

The tax managers also proposed an amendment into a sub-section 1 of section 182 to the Income Tax Ordinance and advised the FBR to levy fine and penalty on violation of provisions whether willfully or otherwise. The amendment would make penalty a mandatory levy, the tax managers noted while giving rationale to the proposal. The sources said many taxpayers in response to notices issued by tax offices argued that their act of violating tax laws was not intentional. The sources said tproposed amendment would empower tax officers to impose penal amount without giving opportunity of hearing.

The tax managers also proposed an amendment into Income Tax Ordinance, 2001 and suggested to introduce monetary penalty on withholding agents for collecting lower than prescribed amount. The sources said it was suggested that an individual who fails to comply with provisions related to advance tax should pay a penalty of Rs100,000 or 25 percent of tax not withheld, whichever is higher.

Likewise, the tax managers recommended an amount of Rs100,000 as penalty on anyone who fails to file complete and sign audited accounts along with return.

The FBR, in the last budget, introduced many provisions to the Income Tax Ordinance, 2001 to widen the scope of fine and penalty in order to increase the compliance by the taxpayers.

Through the Finance Act, 2019, the FBR increased penalty amount by 100 percent to Rs40,000 from Rs20,000 if taxpayers fail to furnish income tax returns by due date under the section 114 of Income Tax Ordinance, 2001.

Pakistan’s tax collection stands around 60 percent below its potential, according to the International Monetary Fund (IMF). The country excessively relies on tax collection on imports and collects around 50 percent revenues at import stage, including customs duty, withholding tax, general sales tax, additional customs duty and regulatory duty.



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