EDITORIAL: The fifteen days extended date for filing of Income tax returns has ended on 15th October. The rationale for the extension this year was essentially due to the collapse of the FBR's IRIS system as the number of filers on the last day far exceeded its capacity. Be that as it may, the message that this explanation sends to the public is that the FBR failed to strengthen its own capacity before giving a deadline, an objective that should have been met well before the last filing date - 30 September 2021, though on that day the FBR issued a circular acknowledging that per hour capacity of the IRIS system was low but claiming that it has been considerably increased since. Time will prove whether this is indeed the case.
This extension, one hopes, brought home to the FBR that given its own digital shortcomings, its ability to implement the Tax Laws (Third) Amendment Ordinance issued on 16 September may be severely compromised. One clause of the Ordinance stipulates that corporate taxpayers must switch to digital mode from account payee cheques for all payments totaling over 250,000 rupees (per account) a year failing which there would be a penalty by disallowing such payments as bona fide expense of the company. Previously, the account payee cheques had been the FBR's preferred mode of payment to settle business transactions as a means to discourage cash transactions.
This provision threatens to disrupt the financial model of transactions employed by businesses throughout the country by securing their sales made on credit through post dated Payee account cheques from their clients. Besides this the business community has additional concerns with respect to the Ordinance including: (i) IBFT (Inter Bank Fund Transfers) transactions are limited to one million rupees and even if banks offer separate enhanced limit for corporates, payments above 10 million rupees cannot be made on IBFT transactions; (ii) most banks do not have the authorization data for digitized corporate accounts nor the technology to implement and digitize the authorization process and capture the complex authorization instructions of the corporates in digital format and manage the transaction approval accordingly; and (iii) there are only 10 banks that offer corporate internet banking platforms that by itself limits a corporate client's ability to make transactions over one million rupees through existing online channels and most corporates may not even have this option as internet banking will not allow access to their accounts as these provide access to individual accounts.
Traders on the other hand are up in arms and while not holding any brief for their insistence not to be forced to file returns perhaps a way out would be to grant them comfort for past years so that their turnover based on point of sales machines would not be used to assess their incomes of past years. Incidentally, this suggestion, if acceded to, may serve to remove the reservations of most Tier-1 retailers and is endorsed by the corporate sector.
It is important to note that this year the extension in date of filing tax returns came in the wake of the August 2021 hacking of FBR data which continues to send shivers up those concerned about the possibility of their personal data being compromised with many skeptical of FBR's assurances that the leak has been plugged and their personal information safe. In addition, those who filed their returns on time consider it unfair as they filed their returns within the deadline. It is therefore time for the FBR to first put its own house in order and amend tax laws that are unrealistic rather than continue to focus on raising revenue instead of reforming the entire tax structure as well as strengthening the IRIS.
Copyright Business Recorder, 2021
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