ISLAMABAD: Telecom operators in Pakistan have agreed to block mobile phone connections of individuals who had not filed their income tax returns for Tax Year 2023, the country’s tax regulator said on Saturday, with the first batch of non-filers, including 5,000 individuals, already communicated to the operators.
Pakistan’s narrow tax base and enduring tax evasion issue have often led to the problem of insufficient revenue collection. The shortfall exacerbates the government’s tendency to run a high fiscal deficit, often financed through domestic and international borrowing.
In Dec., the Federal Board of Revenue (FBR) said the country had a “very narrow tax base” of around 5.2 million people in 2022, out of a population of 240 million people and it had planned to add 1.5 million new taxpayers to the existing base during this fiscal year.
Late last month, the tax regulator said it had decided to block mobile connections of 500,000 people who had not filed their tax returns and has since engaged with the Pakistan Telecommunication Authority (PTA) and telecom Operators to enforce its income tax general order.
“After several deliberations, the telecom operators have agreed to initiate the manual blocking process in small batches until their systems are fully equipped to automate it,” the FBR said in a statement.
“In this regard, the first batch comprising 5000 non-filers has been communicated to the telecom operators today for compliance regarding SIM blockage.”
Subsequent batches will be sent to telecom operators on a daily basis, according to the FBR. The operators have also started sending messages to non-filers regarding blocking of their connections.
The development comes amid efforts by the government to broaden the tax base, including digitalization of the tax collection system to prevent leakages as a large segment of the national economy remains undocumented.
Pakistan, which has been facing an economic meltdown, is also making efforts to introduce structural economic reforms. The South Asian country has to meet a primary budget deficit target of Rs401 billion ($1.44 billion), or 0.4 percent of its gross domestic product, for the current fiscal year before the government presents its budget in June.