Number of ‘junk tax’ returns surges to 2.7m in 2023

Pakistan’s top tax machinery is confronted with a big dilemma of nil-filers, which has reached an alarming level of 68 per cent of total income tax returns in the tax year 2023, Dawn has learned from official sources. This presents a significant challenge for the government in identifying individuals not paying their taxes, with 2.3 million out of 3.4 million potentially concealing their taxable income. This means that only 1.1m taxpayers declared incomes in their returns in 2023. The nill returns are submitted for one-time financial transactions or to take advantage of lower tax rates for placement on the Active Taxpayers List (ATL). Well-placed sources told Dawn that the Federal Board of Revenue (FBR) has decided to send e-notices to around 1.6m nil-filers on Tuesday, requesting that they submit their actual returns in tax year 2024. These nil-filers are identified based on their financial transactions, indicating that they had taxable income and did not report it in their tax returns.