The hierarchy of the Federal Board of Revenue (FBR) is not quick to learn from its omissions and change its strategy. Finance Minister Ishaq Dar had announced in his last budget speech that NTN will be interchangeable with CNIC for filing income tax returns by individuals. This would do away with the requirement of an NTN for filing of tax returns by individuals.
However, this tax measure failed to materialise as new taxpayers without NTNs cannot file their income tax returns because the FBR’s electronic system does not permit new filers without NTNs to generate payment slips commonly known as PSID. Now, with a delay of more than four months, during which new filers are greatly upset, the government has again announced to replace NTN with the CNIC and this step has been made effective from the start of this month.
Under an income tax SRO issued on 3rd November, an individual having CNIC can now file income tax return manually and for this there will be no need for prior registration. For e-filing, however, prior electronic enrolment from the FBR would be mandatory. E-enrollment was also mandatory for a company, AoPs or a foreign national. The commissioner of income tax was empowered to register an individual who has a CNIC but has failed to file tax return. The commissioner will, nonetheless, has to make prior assessment of the individual’s income to assess whether he/she falls in taxable limit.
A person who does not even have a CNIC but needs to file tax return manually will also be registered either on application or if commissioner of income tax is satisfied that income of the individual is taxable. The commissioner of income tax will have to make a decision regarding e-enrollment/registration or to refuse it within a time limit of 15 days. In case of refusal, the person can challenge the decision of the commissioner before the chief commissioner concerned within a period of 13 days.
The above episode amply shows the quality of working in the FBR and lack of proper co-ordination between various organs of the state. Clearly, if the FBR was not prepared to issue the PSID efficiently to enable the taxpayers to file their tax returns electronically, it should have informed the relevant quarters in the government, particularly the Ministry of Finance, which should have not included the said measure in the budget and got it approved from the Parliament beforehand.
There was also another less desirable option. The FBR, after learning about its error of judgement, should have admitted its mistake and made the necessary amends soon or at the beginning of FY16 to save the new taxpayers from mental agony of trying to file their returns without first getting NTNs. Why the FBR took more than four months to arrive at the right decision is beyond comprehension.
It may be mentioned that the Finance Minister had repeatedly announced that the ministry or FBR would abolish NTN by July, 2015 and start using the CNIC for all tax purposes by individuals. The National Assembly through the Finance Act 2015 had also approved the use of CNIC in place of NTN for filing income tax returns by individuals with effect from Tax Year 2015.
The confusion about filing of tax returns this year was not only frustrating for the new taxpayers but may cause a dent on the credibility of the government. Investors and other stakeholders would be tempted to believe that a policy strategy may not be implemented in Pakistan even if it was approved by the National Assembly. Anyhow, we feel that the new income tax SRO would help increase the number of tax filers, especially when the date of filing the returns has also been extended to 30th November 2015. It is sad to note that only about 300,000 persons have filed their tax returns with the FBR so far.
Source: Business Recorder