The government of Pakistan has decided to remove the powers of National Database And Registration Authority (NADRA) for determining the income and tax liability of unregistered persons.
Moreover ,it has also decided by the government to withdraw non-filers for the purpose of broadening the tax base.
Senior officials of The Ministry of Finance informed the sources that the budget proposal is under discussion for incorporation in the Finance Bill 2023.
The process of experiment of expanding the tax net through the NADRA has not achieve the desired outcomes. The authorities have taken the decision after considering all the strong factors to take away all kinds of powers and authorities available under section 175B (powers of NADRA to assess and recover income tax from non-filers) of the Income tax ordinance.
Under the section 175B, the authority has abandoned powers to take all kinds of strong actions against the non-filers of income tax returns.
Through Finance Bill 2023, the Federal Board Of Revenue (FBR) will need to propose the repeal of section 175B of the income tax ordinance. Which grants NADRA the authority to assess and collect inco e tax from non-filers.
After action 175B was removed from the income tax ordinance,the FBR could add a new clause (section 175) that would create a Real-Time National Integrated Database that could be controlled by the SBP or the FBR. Where all the data including banking transactions, could be analysed by artificial intelligence (AI) based on tax declarations.
Moreover, non-compliant tax payers could be encouraged to amend their returns. In case of failure to revise file correct incomes, the information needs to be available to FBR and necessary actions will be taken by the authority.
Moreover, under section 175B,the National Database And Registration Authority (NADRA) on an application by the board are liable to share its records or information the have. They are liable to share it with the board for broadening the tax base or carrying out the factors of the Ordinance
The National Database And Registration Authority(NADRA) may:
- Submit all the information and proposals to the Board with a view to broadening the tax base
- Identify in any relation to person,whether the person is a tax payer or not-(a) properties, assets, liabilities, expenditures, income or transactions that have escaped evaluation or are under evaluation process at a low rate. Or have been subjected to excessive refund or have been miss declared under a particular head of income or otherwise
- (b) the value of anything mentioned in sub-clause (a) of clause (ii),if such value is at variance with the value notified by the Board or the district authorities,as the case may be, or if no such value has been notified the true or market value
- Enter into a memorandum of understanding with the Board for secure Exchange and utilization of a person’s information
The Board has an authority to use and utilize any information communicated to it by the National Database and Registration Authority and forward that information to the authorised department having jurisdiction in context to the subject matter related to the information.
NADRA may use Artificial Intelligence,mathematical or statistical modeling,or any other cutting-edge tool or calculation method to determine an individual’s indicative income and tax liability.
Moroever, the Board will notify the individuals whose indicative income and tax liability has been calculated by NADRA, and that individual will have the option of paying the amount determined under may terms and conditions,installments, discounts,reprieves, pertaining to penalty,and default surcharge, and time limits that the Board may prescribe.
Though, the withdrawal of the said powers will not stop the FBR from utilizing data available with the authority.
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