In order to increase the size of the tax base, the government is likely to take away the National Database and Registration Authority’s (NADRA) authority to assess the income and tax liability of unregistered individuals and non-filers.
The budget proposal is being discussed for inclusion in the Finance Bill 2023, according to senior officials in the Ministry of Finance who spoke with ProPakistani. The effects hoped for from the NADRA’s experience widening the tax net have not been realised.
There is a significant desire among budget makers to eliminate all of the Authority’s powers provided by section 175B of the Income Tax Ordinance (which grants NADRA the ability to assess and collect income tax from non-filers).
This clause gives the authorities wide latitude to retaliate against those who fail to file their income tax returns.The removal of section 175B of the Income Tax Ordinance (which grants NADRA the authority to assess and collect income tax from non-filers) must be proposed by the Federal Board of Revenue (FBR) in Finance Bill 2023.
Following the removal of section 175B from the Income Tax Ordinance, the FBR may introduce a new provision (section 175) for the creation of a Realtime National Integrated database, which may be controlled by the SBP or the FBR. In this database, all data, including banking transactions, may be analysed by AI based on tax declarations, and non-compliant taxpayers may be encouraged to revise their returns.
The plan further said that information might be provided to FBR for any appropriate action in cases of failing to update income or to file correct incomes.
In accordance with section 175B, the National Database and Registration Authority must, on its own initiative or at the Board’s request, disclose its records and any information it has at its disposal or under its control with the Board in order to increase the tax base or further the objectives of the Ordinance.
In some cases, the National Database and Registration Authority
- Submit ideas and data to the board with the goal of expanding the tax base;
- Identify (a) income, receipts, assets, properties, liabilities, expenditures, or transactions in relation to any person, whether or not they are a taxpayer, that have evaded assessment, are under-assessed or have been assessed at a low rate, have received an excessive amount of relief or a refund, or have been incorrectly declared or misclassified under a certain head of income, among other things; (b) the value of anything stated in clause (ii)’s subclause (a), if that value differs from the value notified by the Board or the district authorities, as applicable, or if no such value has been declared, the actual or market value;
- Sign a memorandum of understanding with the Board to allow for the safe sharing and use of a person’s information.
The Board may use and make use of any information provided to it by the National Database and Registration Authority, and it may also forward such information to an income tax authority with jurisdiction over the information’s subject matter so that it may be used for the purposes of the Ordinance.
NADRA may utilise any current technology or calculating method, including artificial intelligence, mathematical or statistical modelling, to determine the indicative income and tax due of any person.
