In its efforts to broaden the country’s tax base and tackle tax evasion, the Federal Board of Revenue (FBR) is seeking new powers. The FBR is proposing to disconnect the electricity and gas connections of tier one retailers who fail to integrate with the computerized system of FBR.
Section 14 AB, if inserted, will give the FBR the power to disconnect utility connections of those who fall under the following categories:
- Any person, including tier 1 retailers, who fails to register for sales tax purposes.
- Registered persons who are not integrated with the computerized system of FBR.
Once integrated, the FBR can issue orders for the restoration of utility connections.
Furthermore, the FBR has been authorized to access the NADRA database. NADRA has been given the power to use algorithms and systematic analysis to calculate the income tax liability of individuals. This move is aimed at enhancing the tax base and getting to the tax evaders.
These proposed changes are part of the FBR’s efforts to increase tax revenue in the country. The government is facing a budget deficit, and the FBR has been tasked with meeting the target revenue collection for the fiscal year. The FBR has set a target of collecting PKR 5.8 trillion in the fiscal year 2022-23.
The FBR has been facing challenges in broadening the tax base and increasing revenue collection. The informal economy, which constitutes a significant portion of the economy, remains untaxed. The FBR has been working to bring the informal economy into the tax net by providing incentives to businesses to register with the tax authorities.
The proposed powers for the FBR are expected to increase compliance among taxpayers and reduce tax evasion. However, there are concerns about the misuse of these powers, and the FBR will need to ensure that these powers are used judiciously and transparently.
The proposed changes are still in the consultation phase, and it remains to be seen how they will be implemented. The FBR will need to work closely with the business community to ensure that the implementation of these changes does not result in undue hardship or a negative impact on the economy.