ISLAMABAD: The Minister of State for Finance, Ali Pervaiz Malik, Tuesday, admitted before the National Assembly Standing Committee on Finance that restrictions on the economic transactions of non-filers would cause a lot a pain and disruption, but it is needed to bring ‘black money’ into documented regime.
The committee directed the Minister of State for Finance and chairman Federal Board of Revenue (FBR) to clearly specify the economic impact of these restrictions on non-filers.
“There would be serious economic impact of the embargo on economic transactions of non-filers”, committee members apprehended.
During the review of the Tax Laws Amendment Bill 2024, the Minister of State for Finance stated that the governments should have not used the non-filers as revenue spinner and revenue generation.
Amended tax laws to tighten noose on non-filers
Minister of State for Finance Ali Pervaiz Malik categorically said that non-registration of non-filers for the last many years is an institutional failure of the state and governments used non-filers to generate revenue which was a disaster for the documented economy.
The minister said the government has remained silent on non-filers for 75 years but is now addressing the issue.
He went on saying that the persons having un-documented wealth or money also want avenues to park their illegal money. If the government is able to stop the use of around Rs9 trillion cash in circulation, the non-filers would be forced to come into the documented regime.
“Only five million filers cannot run the country and we have to go after under-taxed and non-taxed sectors,” the minister said.
Under the new tax laws, non-filers will face restrictions like being unable to carry out big transactions such as buying property, and vehicles, or investing in businesses or equity.
In light of the overall and international environment, the Tax Laws Amendment Bill 2024 would play a key role in documentation of economy.
He quoted an example that, there was a time when people used to deposit millions Dirham in banks of Dubai and no questions were asked. Now, the suspicious transaction reports (STRs) and currency transaction reports (CTRs) are generated in Dubai banks and reported to Pakistan, he said.
“Either, the money is white or black, and there is no grey money,” the minister maintained.
He stated that nearly half of Pakistan’s economy is run on black money while tax authorities have now been cleared to hire 1,600 auditors to track non-filers and enforce the Tax Laws (Amendment) Bill 2024 on their finances.
Minister of State for Finance Ali Pervaiz Malik briefed the committee on the bill which will be used to enforce long-standing efforts of the FBR to increase tax compliance and address undocumented wealth.
Members of the committee asked the FBR chairman to explain the impact of these restrictions on non-filers on the economy.
FBR Chairman Rashid Mahmood Langrial stated the people having un-declared income were facilitated and documented sectors were overburdened with taxes. The revenue collected in 2008 and 2016 is the same revenue collected in 2024. This means from 2008 to 2024 we have not moved a bit. Despite increase in sales tax rate, minimum income tax rate raised from 5 to 15 percent heavy taxation on salaried class and others, the revenue collection was not increased. The tax rates were increased on those individuals/ sectors, who have no option to get out of the tax net.
On the other hand, the people, who were operating in black economy having un-declared income, were facilitated. The governments made illegal money legal by offering higher rates of withholding tax rates to the non-filers, the FBR chairman stated. Resultantly, the government has to do huge borrowing for public sector fiscal investment and local expenditures.
On the sales tax side, FBR Chairman Langrial explained that less than 25 percent of the manufacturing units are registered with the sales tax department. Similarly, the wholesalers and retailers are not operating into the tax net. Those into sales tax net are involved in under-reporting, wrong tax adjustments and mis-reporting of taxes.
The federal cabinet has been given powers to do set sequences, timelines and amount of restrictions. The federal government will implement the bill in a systematic manner. The gradual implementation of the bill will be done as per federal cabinet’s approval.
For the first time, the FBR has conducted a trial run of high powered incentive regime. This means that the tax officials would be categorised in terms of quality of output and in terms of integrity. The officials would get four times higher salary as per categories, Langrial added.
Copyright Business Recorder, 2025
Comments