Non-Filers Beware: New Government Penalties Unveiled

The government has proposed a series of punitive measures in the FY2024-25 budget, including a potential travel ban for individuals who fail to file income tax returns, with the goal of raising Rs1.761 trillion in new revenue.

This initiative is aimed at compelling non-filers to comply with tax regulations, reflecting the government’s effort to better document the economy. During his speech to the National Assembly on Wednesday, Finance Minister Muhammad Aurangzeb emphasized that these measures are intended to digitize the economy and implement a progressive tax system where taxes are based on income levels.

The finance bill suggests changes to Section 114B of the Income Tax Ordinance, 2001, to prevent non-filers from traveling abroad. Currently, this section allows the FBR to disable SIM cards and cut off electricity and gas supplies for non-filers.

The proposed amendments include increasing the advance tax on sales to non-filer distributors, dealers, and wholesalers from 0.2% to 2%, and for non-filer retailers from 1% to 2.5%. Additionally, businesses of traders and shopkeepers who do not register under schemes like the Tajir Dost Scheme will be sealed. Unregistered shopkeepers or traders could face up to six months of imprisonment, fines, or both.

If enacted, these measures would prevent any Pakistani required to file tax returns but fails to do so from traveling abroad, with exceptions for holders of National Identity Cards for Overseas Pakistanis, individuals traveling for Hajj, Umrah, minors, and students. Agencies that do not enforce these measures will face a penalty of Rs100 million, which will increase by Rs200 million for each subsequent failure.

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