“The honest taxpayers are just idiots.” This has been noted by Tax Reform Commission (TRC) in its report submitted to finance ministry in May 2015 while referring to amnesty schemes announced by the government for looters and plunderers.
“After every other year, the rulers announce a tax amnesty scheme to prove that the honest taxpayers are just “idiots”,” quoted by the TRC in its report.
Apparently the FBR proved it as a true because thousands of income tax return filers, mostly salaried persons, have been served notices for delaying in compliance on due date.
The filed offices of FBR has issued thousands of notices to late filers in pursuance to Section 231E of Income Tax Ordinance, 2001, which was introduced through Finance (Supplementary) Act, 2018, by the present government.
The Section 231E has been introduced in order to close audit that were selected through deleted Section 214D of the ordinance.
In order to promote income tax return filing, the government through Finance Act, 2015 introduced Section 214D, under which the non-filers and late filers would be subject to automatic selection of audit.
Interestingly, the FBR is focusing on late filers as those are soft target and in the documented economy.
Some salary persons have approached PkRevenue.com pointing out that they had received audit notices from various Regional Tax Offices (RTOs) because they had filed income tax return with only one day delay.
The salary persons are around 70 percent of total income return filed with the FBR. The salary persons are most compliant taxpayers because they have no other option as their income deducted at source by employers.
Today those salary persons who had become return filers in previous years on appeal from the FBR are regretting while receiving audit notices just for late filing the return.
The FBR is asking the late filers to pay minimum penalty so their audit cases would be closed. The penalty as per Section 182 of the Ordinance is around Rs20,000. In case of late filing of income tax return, the section says: “Such person shall pay a penalty equal to 0.1 percent of the tax payable in respect of that tax year for each day of default subject to a maximum penalty of 50 percent of the tax payable provided that if the penalty worked out as aforesaid is less than twenty thousand rupees or no tax is payable for that tax year such person shall pay a penalty of twenty thousand rupees.”
The tax exempt income from salary is Rs400,000. It means Rs400,001 is subject to tax. In case a person having this amount as annual salary and unable to file return by due date and unfortunately he submitted return after due date then a penalty of Rs20,000 is payable by him when his total payable tax is zero.
According to estimates over 4 million NTN holders are in the country and each NTN holder is required to file income tax returns and only 1.4 million people filed return, including of those filed after due date. It means 2.6 million automatically selected for audit, which would be an impossible task for the FBR. Therefore, it was easy task to penalize people for filing returns.
Further, the government recently announced an amnesty for local and domestic undisclosed assets for looters and plunderers. Why the amnesty was granted to those evaders? Because the FBR is unable to apprehend those people due to political influence or otherwise.
In case of corporate entities when FBR issues notices for audit they usually move to courts through filing suits or petitions. But in case of salary people they have no voice and therefore they are soft target for the FBR to show their performance.
It is established that FBR is not interested in encouraging people to attract people in the tax net.
On the other side presently the taxpayers are thinking: Is TRC is right saying “the honest taxpayers are just idiots”?