On Thursday, Pakistan’s Senate approved the Tax Amendment Bill 2024, and the Federal Board of Revenue (FBR) revealed it had issued notices to 169,000 wealthy individuals to bring them into the tax system. The FBR also warned that more high-income earners would be identified as the country digitizes its tax processes.
The Tax Amendment Bill aims to strengthen regulations and reduce tax evasion. Among its provisions, the bill allows the FBR to restrict non-filers from buying vehicles over 800cc, opening bank accounts, purchasing property beyond certain limits, or acquiring shares. The bill will now return to the National Assembly for final approval and become law, but the federal cabinet must first approve the FBR’s new powers.
The FBR hopes these reforms will help address a projected tax shortfall of Rs7.1 trillion for the 2025 fiscal year.
Crackdown on Non-Filers:
FBR Chairman Rashid Mahmood Langrial, along with Finance Minister Muhammad Aurangzeb and other officials, shared that data analysis had helped identify around 190,000 potential taxpayers. Only 38,000 of them have filed returns, paying Rs370 million in taxes, while the rest remain non-compliant. Notices were sent to 169,000 of these individuals.
Langrial also stated that the government has already secured Rs620 billion from the top 5% income earners who have filed their returns. However, an estimated 2.7 million wealthy individuals still remain outside the tax net, with potential revenue of Rs1.7 trillion.
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Industry Monitoring and Digitalisation:
The FBR is also focusing on production monitoring in sectors like sugar, cement, textiles, and beverages to curb tax evasion. Langrial mentioned that systems for monitoring the sugar industry were already in place, and mechanisms for other sectors were being finalized with help from Chinese consultants.
Despite progress, Langrial acknowledged challenges in the FBR’s operational capacity, particularly the slow adoption of point-of-sale (POS) systems in the retail sector. Finance Minister Aurangzeb expressed dissatisfaction with this and emphasized the need for better implementation.
Simplifying Tax Filing:
Aurangzeb also voiced frustration with the complexity of the tax return forms and urged for simplification, particularly for salaried individuals. Langrial assured that a simplified form would be introduced for the upcoming tax year.
Moving Towards a Digital Future:
The government’s goal is to raise the tax-to-GDP ratio to 13%, up from the current 9-10%. Langrial highlighted that digitalization is key to enhancing transparency, reducing human intervention, and curbing corruption in the tax collection process.
In discussions on automated risk management, Langrial proposed collaborating with banks to create algorithms that would track financial transactions tied to individual national identity numbers (CNICs), aiming to prevent fraud. Additionally, discussions on expanding restrictions to include the sale and purchase of gold and tackling counterfeit goods, such as cigarettes, also took place.
