Government Set to Abolish Non-Filer Category, Introduces New Tax Restrictions

In a significant move to enhance tax compliance and widen the tax base, the government has decided in principle to abolish the non-filer category. The Federal Board of Revenue (FBR) is set to impose 15 restrictions on individuals who fail to file tax returns, marking a key shift in the nation’s tax policy.

The new restrictions will cover various financial activities, including the purchase of property and vehicles, investments in mutual funds, the opening of current accounts, and international travel (excluding religious pilgrimages). Previously, non-filers could pay a nominal fee to avoid full tax liability on such transactions, but this loophole will now be closed.

FBR Chairman Rashid Mahmood Langrial, while unveiling the plan, said the government will target five major sectors initially. “This decision is part of the broader transformation agenda approved by the Prime Minister, focusing on ensuring tax compliance,” Langrial said.

The chairman further criticized the concept of non-filers, noting that such classifications are rare globally. He emphasized the need to shift focus toward those who comply with tax regulations versus those who don’t. “We will use advanced machine learning and algorithms to identify non-filers,” he added.

To enforce these changes, an ordinance is being prepared, with the Ministry of Law involved in the drafting process. The FBR aims to implement these rules swiftly, reducing avenues for tax evasion.

According to FBR data, only Rs 25 billion was collected last year from non-filers in the form of fees, while significant potential tax revenue remains untapped. As part of its new strategy, the FBR will also prohibit non-filers from opening traditional bank accounts and bolster efforts to curb smuggling by automating processes and increasing workforce presence at key entry points across the country.