ISLAMABAD: Pakistan has decided to block mobile phone connections of more than 500,000 individuals who had not filed their income tax returns for Tax Year 2023, the country’s tax regulator said on Tuesday.

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.

On Tuesday, the FBR issued an order to enforce filing of returns by the persons who were not appearing on the active taxpayer list.

“FBR has taken decisive action by issuing an order to disable mobile phone SIMs associated with 506,671 individuals who fall under the aforementioned category,” the regulator said in a statement.

“The Pakistan Telecommunication Authority (PTA) and all telecom operators have been instructed to enforce the ITGO with immediate effect, ensuring swift implementation of the order.”

These mobile connections would remain blocked until restored by the FBR or the concerned Inland Revenue commissioner, according to the statement. Telecom operators were asked to furnish a compliance report to the FBR by May 15.

Amid its efforts to broaden the tax base, the government of Prime Minister Shehbaz Sharif has recently decided to digitalize the tax collection system to prevent leakages even 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.