Proposed tax bill: Stricter non-filer measures set for review

A bill concerning tax laws is set to be reviewed on Tuesday by the National Assembly Standing Committee on Finance. If the legislation gets passed, non-filers will suffer as stringent restrictions will be imposed upon them.

These restrictions will effectively block out non-filers from purchasing or registering any vehicles except for those that are 800cc or less. Furthermore, they will be unable to trade on the stock exchange over certain thresholds and will not be able to purchase property past a set limit.

The restriction on stock market trading is expected to cause a slight slowdown in the Pakistan Stock Exchange (PSX) as a sizable amount of daily trades are made by non-filers.

In order to appease the International Monetary Fund (IMF), Islamabad has remained unrelenting in its crusade against non-filers and tax evaders. Prime Minister Shehbaz Sharif and Finance Minister Muhammad Aurangzeb have been leading the anti-non-filer campaign in an attempt to boost tax collection levels.

According to reports, higher withholding tax rates on non-filers are not to be eliminated immediately. Rather, a phased reduction is to be followed once the bill passes.

If the bill passes, non-filers will find their ability to perform financial transactions to be severely hindered. Lawmakers in Islamabad expect financial institutions such as banks to cooperate to ensure that the bill remains effective.

Motor vehicle manufacturers are expected to suffer, as the bill might drop their sales volumes. Analysts predict that this may result in revenue levels for car giants such as Toyota Motors and Honda. The primary reason behind this is that these automobile companies manufacture cars that are above 800cc.

While the bill seems like a surefire way of boosting tax collection levels by restricting the activities of non-filers, experts are outlining how they might dodge the system. For instance, the passage of the bill may cause non-filers to register cars and property that they purchase in the name of their family members. Such loopholes have historically weakened the effectiveness of tax collection improvement schemes.

However, the bill might pose significant challenges for businesses. According to reports, the bill will allow Chief commissioners of Inland Revenue to seal business premises and seize the assets of businesses that do not comply with taxation rules on the spot.

Business owners may now have to hire professional auditors to ensure that their operations are compliant with tax laws, thereby raising costs. More seriously, however, some analysts are outlining how granting sweeping powers to commissioners may cause a serious drop in business confidence as assets could get seized arbitrarily.