Pakistan Government to block Mobile SIM Cards of over 500,000 users for failure to file tax returns

Authorities in Pakistan have announced plans to block the mobile phone SIM cards of more than half a million users as part of a crackdown on tax evasion. The Federal Board of Revenue (FBR) identified 2.4 million potential taxpayers who were not registered in the tax system.
According to reports, the FBR has ordered the blocking of SIM cards for 506,671 individuals who failed to file their tax returns for the year 2023. The blockade will remain in place until the FBR or the Commissioner Inland Revenue decides to restore them.

Implementation and compliance:

The FBR has directed the Pakistan Telecommunication Authority (PTA) and all telecom providers to promptly implement the order and submit a compliance report by May 15. Notices have been issued to the identified individuals who were not registered as taxpayers.
The FBR identified individuals for SIM card blockade based on specific criteria, including those who had declared taxable income in the past three years but did not file their tax returns for 2023. The move aims to encourage tax compliance and increase the number of return filers.
The FBR's initiative aims to encourage low-income individuals to submit their tax returns and contribute to the tax system. However, the effectiveness of this measure remains to be seen, and its impact on tax compliance rates will become clearer over time.

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Overall trends:

The FBR received 4.2 million taxpayers by March 1, 2024, compared to 3.8 million returns received during the same period last year, indicating a slight increase. However, the total number of income tax returns received in tax year 2022 was 5.9 million.
SIM cards will be automatically restored for individuals who file their tax returns for the year 2023. This measure aims to incentivize tax compliance among individuals and increase the number of active taxpayers in the country.
The blockade of SIM cards is part of the FBR's efforts to combat tax evasion and expand the tax base in Pakistan. While the initiative may appear promising, its effectiveness in achieving its objectives will depend on factors such as enforcement, compliance, and the response of taxpayers to the incentive to file their returns.

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