Finance Minister Abdul Hafeez Sheikh on Thursday told the National Assembly that presently there was no law in the country, which could make it mandatory for the holders of National Tax Numbers (NTNs) to file income tax return, but it would be made compulsory for every NTN holder to file his income tax return during 2012.

The statement of the Finance Minister in the Lower House is clearly not in accordance with income tax provision (section 114 of the Income Tax Ordinance 2001, which explicitly states that the NTN holders are liable to file income tax returns.

Section 114 of the Income Tax Ordinance 2001 says, "114.

Return of income.

(1) Subject to this Ordinance, the following persons are required to furnish a return of income for a tax year, namely:- 1(a) every company; 2 (ab) every person (other than a company) whose taxable income for the year exceeds the maximum amount that is not chargeable to tax under this Ordinance for the year; 3 (ac) any non-profit organisation; 4 (ad) any welfare institution approved; 5(b) any person who, (i) has been charged to tax in respect of any of the two preceding tax years; (ii) claims a loss carried forward under Income Tax Ordinance for a tax year; (iii) owns immovable property with a land area of 250 yards or more or owns any flat located in areas falling within the municipal limits existing immediately before the commencement of Local Government laws in the provinces; or areas in a Cantonment; or the Islamabad Capital Territory; 2 (iv) owns immovable property with a land area of 500 square yards or more located in a rating area; 3[(v) owns a flat having covered area of 2000 square feet or more located in a rating area; 4(vi) owns a motor vehicle having engine capacity above 1000 CC; and 5 (vii) has obtained National Tax Number, section 114 of the Income Tax Ordinance 2001.

Responding to a call attention notice of MNA Tahira Aurangzeb, the Finance Minister said it was not mandatory for the NTN holders in our country to file return and deposit due amount of taxes under the existing laws.

It has been decided that the filing of income tax returns be made mandatory for all National Tax Number (NTN) holders from the new financial year.

It would be made compulsory for the NTN holders to ensure their returns filing, Abdul Hafeez Sheikh added.

Finance Minister further stated that the Federal Board of Revenue (FBR) has collected Rs 972 billion during first seven months (July-January) 2011-12, reflecting an increase of 26 percent as compared to the corresponding period of last fiscal.

The FBR has witnessed record increase of 26 percent in revenue collection which was not seen in the past.

The tax collection has been increased during 2011-12 following introduction of the tax reforms in the taxation system.

The sales tax reforms have been introduced in the sales tax regime.

The powerful lobbies and influential sectors have distorted the sales tax regime.

The government has withdrawn exemptions and sales tax zero-rating under the reforms in the sales tax.

The FBR witnessed 26 percent increase in revenue collection without increase in the tax rates.

Moreover, this growth in revenue collection has been witnessed despite abolition of the 2.5 percent special excise duty (SED) on all items, federal excise duty on 15 goods and withdrawal of regulatory duties (RD) on 397 goods.

The government has not increased custom duty on any product.

In fact, customs duty is being simplified and reduced on certain items in 2011-12.

Abdul Hafeez Sheikh stated that the FBR has collected Rs 1558 billion during last fiscal year witnessing an increase of 17 percent as compared to previous fiscal year.

Admitting the low level of filing of income tax returns in the country, the Finance Minister said out of 3.1 million NTN holders in 2009-2010 only 15.8 million people had filed income tax returns.

Similarly, only 13.8 million had filed the tax returns out of 3.3 million registered NTN holders during 2010-2011.

The basic reason behind decease in the number of return filers is that the government had enhanced the basic income tax exemption limit from Rs 300,000 to Rs 350,000 for individual business taxpayers and salaried taxpayers.

This decision will benefit around 2.8 lakh persons who would not be required to file income tax returns.

He said that low level of compliance and enforcement of return filing has remained a problem for the last many years.

Responding to a query on bringing rich people into the tax net, he said that the FBR has identified 700,000 potential taxpayers, who belong to rich class but even do not have obtained the NTNs.

These persons live in posh localities, frequently travel aboard and have multiple bank accounts.

The FBR has served notices to 300,000 potential taxpayers under the drive to document these potential persons.

The FBR has recovered taxes from 35,000 potential persons and remaining have been strongly pursued under the exercise of the broadening the tax base.

In this regard, no exemption would be given to potential persons that would be brought within the documented regime, the Finance Minister added.