FBR cannot penalize late filers: Tax experts

Pakistan, August 20, 2024: Experts have challenged FBR’s attempt as unconstitutional to retroactively implement penalties over late filers referring to the Finance Act 2024.

According to details, the Federal Board of Revenue’s (FBR) attempt to implement a penalty on the newly introduced “late filers” category is under review. Meanwhile, taxpayers have headed toward the Lahore High Court to contest this move by FBR.

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The taxpayers claim that despite the petitioner’s status as “active” in the taxpayers list, they are pressured to pay the advance tax. Moreover, the FBR directs elevating the tax to 6% rather than the 3% rate prescribed under Division XVIII of Part IV of the first schedule of the Income Tax Ordinance, 2001.

In addition, the petitioner claims that FBR’s enforcement lacks legal justification and is unlawful. They believe FBR should focus on smooth compliance with the filing process rather than relying heavily on penalties.

On the other hand, tax professionals state that specific regulatory constraints limit FBR’s ability to penalize late filers. According to them, these constraints prevent FBR from imposing fines on late filers but still submit their returns.

This clarification from tax professionals will affect taxpayers and FBR’s approach to tax administration. On the one hand, it will allow taxpayers to focus on accurate filing without the immediate fear of penalties. Meanwhile, FBR has to review its mechanism and provide clearer guidance on tax filing procedures.

Tax experts have suggested that taxpayers remain informed about the deadlines and regulatory changes to avoid inconvenience.  They also suggested FBR extend the filing periods or more accessible online services to provide convenience to taxpayers.

As the tax landscape continues to evolve, it is important to stay informed and understand the limitations applied by FBR for effective compliance. Stay connected with RBS for more updates on penalties on late filers.