In a major development, the Federal Board of Revenue (FBR) on Tuesday issued legally-binding instructions to the relevant departments to block mobile phone connections of over half-a-million non-filers, as its campaign to voluntarily register retailers also falls apart with only 75 retailers availing the scheme.

The tax machinery also faced another setback on Tuesday when its 10-month tax collection fell short of the goal by around Rs40 billion. Against the July-April target of Rs7.414 trillion, the FBR provisionally collected over Rs7.38 trillion. There was a 31% increase in the collection during the 10 months period.

The developments came on the heels of growing resentment within the tax machinery over the government’s decision to remove 25 allegedly corrupt and inefficient officers. The general body of the customs officers met on Tuesday and the 450 officers from grade 17 to 22 considered the options to either go on strike or file en masse applications to go on leave.

The FBR has issued the Income Tax General Order (ITGO) to disable the mobile phone SIMs of 506,671 persons who were not appearing on active taxpayer list but are liable to file the Income Tax Returns for Tax Year 2023 under the provisions of the Income Tax Ordinance, 2001, according to an announcement by the FBR.

One person may have more than one SIM card and all of those connections will be cut off with immediate effect, said a senior FBR official. He said that about 1 million to 1.5 million SIM cards would be blocked because of the FBR order.

It is the first major, much-needed step that the FBR has taken after all its reminders and tax notices could not convince the people to fulfil their statutory obligation. Under the act of parliament, every person earning Rs600,000 annual income or owning at least 1,000cc car or a house is liable to file the annual tax statement.

The FBR had served tax notices on 2.4 million such non-filers and in the first phase it had blocked the SIM cards of over half a million who had taxable income and were earlier filing statements but did not file this time.

Out of these, 450,000 individuals were identified by the FBR and the remaining 50,000 by using the third-party data of their expenditure and consumption patterns.

Malik Amjad Zubair Tiwana, the chairman of the FBR, said that the government was fully committed to go after non-filers and the process would not end at just 500,000 people.

For the tax year 2023, so far only 4.5 million people have filed their annual returns as against 5.9 million filers for tax year 2022.
The FBR said that mobile SIMs of these individuals will remain blocked until restored by the FBR or the Commissioner Inland Revenue having jurisdiction of the person. The Pakistan Telecommunication Authority (PTA) and all telecom operators have been directed to ensure compliance of the FBR’s orders with immediate effect.

The Special Investment Facilitation Council (SIFC) — the joint civil-military body — would seek regular updates from the FBR and the PTA. The telecom operators are mandated to furnish a compliance report to the FBR by May 15, 2024, to provide transparency and accountability in the enforcement process.

This strategic initiative underscores the FBR’s commitment to fostering a culture of tax compliance and accountability among taxpayers, said the FBR.

Retailers registration scheme falls apart

The government of Prime Minister Shehbaz Sharif had also launched a compulsory tax registration scheme to bring in about 3.2 million retailers who remain outside the tax net. It had given one-month time to these retailers to voluntarily register with the tax machinery –a deadline that lapsed on Tuesday.

Till the last date, only 75 retailers got registered with the FBR, said the officials. This shows the stubbornness on the part of the retailers who are hell bent on staying away from the tax system. The FBR has said that it would move legally against the retailers who still remain outside the tax net.

The scheme had initially been launched only in six cities –- Lahore, Karachi, Islamabad, Peshawar, Quetta and Rawalpindi. Some of the non-filer retailers might be among those whose SIM cards were blocked with immediate effect.

Tax collection

The FBR collected Rs7.38 trillion during the first 10 months of this fiscal year, short of the goal by about Rs40 billion. For April, the government had set the tax target at Rs707 billion while the ten-month was Rs7.414 trillion. But the FBR is still confident of achieving its Rs9.415 trillion annual target despite a slump in imports.

Income tax collection amounted to Rs3.52 trillion during the first 10 months of this current fiscal year. Sales tax and the custom duties again remained the weakest areas. The sales tax collection reached over Rs2.5 trillion. The FBR collected Rs452 billion in FED. It collected Rs897 billion in custom duties.

The customs is constantly falling short of its targets due to restrictions on imports.

Customs Officers resent

The prime minister last week removed 25 officers of the FBR serving in grade 21 and 22 from their positions due to adverse reports against them by three premier intelligence agencies. However, there is a strong resentment against the decision and the Customs General Body met on Tuesday to formalise a strategy to deal with the new situation. Out of these 25 officers, 11 belonged to the Customs Service.

The customs officers opined in the meeting that they did not have an issue with the government’s decision but they objected to lack of transparency in the process. Senior most customs officers have been affected by the government’s move, including their Member Customs Operation, Member Legal and Director General of Customs Intelligence and Investigation. Some of these had been promoted to their next pay scales by the last government of Prime Minister Shehbaz Sharif.

In the next phase, the prime minister is planning to remove grade-20 officers of the Customs and Inland Revenue Service based on the same criteria. This has now created uneasiness among the grade 20 officers.

The Customs Officers discussed the options of going on indefinite strike and submitting applications for leave from the duty. A meeting of the Customs Officers Association will now take place to pick one of these options.