The government is planning several significant changes to tax laws in the upcoming Finance Bill 2024, which include increasing the cost of financial transactions for non-filers of income tax returns, aiming to generate an additional Rs300 to Rs400 billion in revenue for the 2024-25 fiscal year.

The Bill would also enhance the powers of the Directorate General of Digital Invoicing, Federal Board of Revenue to document supply chains of all major businesses, Business Recorder reported.

Earlier this month, local reports said that taxes on cash withdrawals from banks could be increased in the next budget. Such a suggestion had been discussed in negotiations between Pakistani authorities and the International Monetary Fund team.

An estimated amount of more than Rs15 billion is expected to be collected annually through the advance tax on cash withdrawals. There was a possibility of increasing taxes on income from non-essential and luxury items in the upcoming budget.

Last week, the global lender said that the IMF mission and Pakistan have made significant progress towards reaching a staff-level agreement for an extended fund facility.

“The mission and the authorities will continue policy discussions virtually over the coming days aiming to finalise discussions, including the financial support needed to underpin the authorities’ reform efforts from the IMF and Pakistan’s bilateral and multilateral partners,” IMF Mission Chief Nathan Porter said.

It is likely that the government would introduce a single turnover-based registration threshold for all businesses, removing previous discriminatory practices.

The government might implement an overseas vendor registration regime, requiring foreign suppliers of goods to Pakistani consumers to register and collect federal sales tax.

Moreover, the ruling party is planning to impose a “duty” on input tax claimants to ensure they are not involved in missing trader fraud and to report suspicious transactions, with penalties for non-compliance.

Additionally, the FBR has proposed raising the withholding tax on cash withdrawals by non-filers from 0.6% to 0.9%, expected to generate Rs15 to Rs20 billion in extra revenue.

More than Rs50,000 cash withdrawals by non-filers, in a single day, through credit cards/ ATMs are also subjected to 0.6 per cent withholding tax.

It intends to make supplies to unregistered persons more costly for the business community.

The government aims to penalise non-filers of income tax returns through such measures and address issues with the current personal income tax structure, which incentivises characterising income in certain ways to minimise tax burdens.

It merits here to mention that the government’s drive to tighten the noose around non-filers was already under way.

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In April, the Federal Board of Revenue ordered the Pakistan Telecommunication Authority and telecom operators to block 506,671 mobile phone SIMs of non-filers.

The Income Tax General Order was issued to disable the mobile phone SIMs in respect of persons “who are not appearing on active taxpayer list but are liable to file the Income Tax Return for Tax Year 2023 under the provisions of the Income Tax Ordinance, 2001”.

On May 22, the Islamabad High Court Chief Justice Aamer Farooq said the government’s decision on blocking SIMs was still in effect.