Agents to help file tax returns

Meeting each financial year's revenue earning target has traditionally been a huge challenge before the country's top tax administrator, the National Board of Revenue (NBR). Of a host of factors that lie behind non-fulfilment of the revenue targets, non-payment of tax by a large section of the citizens registered with NBR as taxpayers is one. Most importantly, the majority of the taxable population are yet to be brought under the tax net. To get around these bottlenecks, the government is learnt to have come up with the idea of employing private agents who would help new taxpayers file tax returns from the next fiscal year, FY2023-24. It is to be noted here that of the total 8.8 million people currently holding Tax Identification Numbers (TINs) issued by the NBR, as of April this year, only 36 per cent did actually pay income tax. That means the NBR is clueless about the remaining 64 per cent, which is close to two-thirds of registered taxable citizens of the country. As a result, the state exchequer is being deprived of the tax payable by a large number of citizens. Evidently, with its existing facilities including manpower, the highest tax authority is not able to reach even the listed taxpayers, let alone those remaining outside the tax-net. Against this backdrop, it is understandable why the NBR has opted for hiring private agents to help people pay tax.
As reports go, the agents, to be called Tax Return Preparers (TRPs) henceforth, would get incentives at certain rates against the service they would render on behalf of the NBR. In fact, such arrangements in aid of a government's tax collection effort with additional manpower are not unprecedented. There are instances of engaging such private operators under the revenue authorities in the advanced economies like the USA, the UK and Australia. Hopefully, the government has drawn on their experiences in the matter and done the necessary homework before putting in place this new arrangement for tax collection. The details on the rules of engagement of the TRPs as made available to the media point to the required rigour that has gone into preparing the draft guidelines for the purpose. However, as could be gathered, upon receiving recommendations from the stakeholders on the draft rules thus framed till June 25, the new arrangement will be put into effect from July 1 next.
A few aspects of the draft rules to guide the said TRPs would be worth mentioning here. As for instance, a TRP can only prepare the income tax return of a person, but not represent her/him at the tax office. There will be a support organisation to maintain the TRPs' personal profiles, monitor their work and provide them with necessary logistic support. It was further given to lean that the TRPs would be engaged after being certified through a Tax Aptitude & Accounting Test (TAAT). On being so employed, a TRP would get incentives at set rates against the amounts of taxes to be paid by a first-time tax return filer for three years. Later, for the fourth and fifth year, the ratio of incentives for a TRP would be gradually reduced and from the sixth year the provision (of incentives to TRPs will come to an end.
Hopefully, the idea of engaging TRPs will work as planned by the NBR towards meeting its yearly revenue targets as well as further widening the tax net.