Islamabad:
The Federal Board of Revenue (FBR) has handed down ‘nudging’ messages to nearly 11,000 companies and individuals advising them to set deviations in their last VAT returns or be ready for consequences such as sanctions, freezing of bank accounts and sealing of companies.
The announcements were issued last month in the middle of the negotiations between business and the government, which emphasized the authorities’ decision to recover duly sales and income taxes from individuals and businesses.
FBR chairman Rashid Langrial believes that existing taxpayers pay far less than their proper taxes. He has begun to use a risk management system to identify loopholes in the tax return filed by these devices and individuals for the past five years. Sources said that in the first phase, about 11,000 nudging messages of corporate tax office were served in Karachi, Lahore and Islamabad. Dealers in Karachi and Lahore also observed a strike last month against the government’s decision to give the arrest powers to FBR and add half of over RS200,000 in cash expenses in income tax calculations.
When contacted, FBR said these “non-intrusive and legally non-binding nudging messages” were served to encourage behavioral and social changes among taxpayers.
“Please correct deviations in your turnover indication. Your inaction will be considered a choice not to comply,” FBR warned in its messages to businesses and individuals in Lahore. FBR warned that failure to address anomalies and submission of accurate returns in the future could lead to financial sanctions, placement of FBR staff in companies for surveillance and the best assessment assessments from tax commissioners, which could result in heavy fines.
It also advised thousands of people that their bank accounts could be frozen and business premises are sealed for non -compliance. Taxpayers were informed that FBR used advanced data analysis to investigate returns and benchmark them against peer companies and jurisdictions. The analysis was fully automated without human involvement. FBR said that for the tax years 2019 to 2024, its system identified deviations in 2024 return. These included unusually high sales required as exempt or under reduced interest rate categories and the addition of low value based on the comparison of sales with purchases.
“To avoid enforcement measures, make sure these deviations do not repeat in subsequent returns and archive correct tax returns for the coming overdue periods,” warned FBR. Jawed Bilwani, President of Karachi Chamber of Commerce and Industry (KCCI), criticized FBR’s decision to earn messages during ongoing conversations. He said many KCCI members received messages without any prior consciousness campaign.
Bilwani also criticized the FBR’s method of comparing a store’s sales patterns with competitors, arguing that sales and value added depend on fire and quality and are not uniform. “A customer can buy a shoe for RS100 or RS1,000. FBR has no right to treat both values the same,” he said.
However, FBR claimed that nudging messages helped increase the number of returns lodged in July. A final analysis will be done after the extended submission deadline on August 4th. In another type of nudging message, FBR warned that the sale of reduced interest rates was unusually high compared to domestic sales, with many sales claimed as exempt or under reduced interest categories instead of taxpayers.
“Your reported output tax is significantly lower than expected for companies in your sector and location,” the message said.
However, business claimed that it is unjustified to compare similar companies without explaining differences in efficiency, cost structures and management. FBR also marked excessive refund requests that came from high incoming tax requirements and an unusually large number of credit and debt notes. “Please correct deviations in your turnover tax to avoid strict enforcement measures,” another message said. FBR added that enforcement measures, such as posting inspectors on business sites, especially in cement factories, have significantly improved collections despite low sales.
The FBR chairman has also transferred over 250 taxi responses from grade 17 to 22 as part of a strategy to only place A and B category officers, as classified by different agencies, in key field positions.
