ByIslamabad, Pakistan: Finance Minister Muhammad Aurangzeb on Thursday unveiled an ambitious plan to digitize the Federal Board of Revenue (FBR), aimed at widening the tax net to include high net worth individuals (HNWIs). The government is intensifying efforts to address tax evasion and increase revenue collection by targeting affluent individuals who have historically avoided their tax obligations.
Aurangzeb revealed that the FBR has issued tax notices to 186,000 HNWIs identified for possessing substantial assets, income, and vehicles while failing to contribute adequately. Authorities estimate that around 670,000 wealthy individuals, or the top five percent of earners, remain potential tax evaders despite their significant spending patterns.
Flanked by key officials, including Information Minister Ataullah Tarar, State Minister Ali Pervez Malik, and FBR Chairman Rashid Mahmood Langrial, the finance minister emphasized the importance of a collective effort to enhance compliance. He pointed out that the National Fiscal Pact, signed by the federal and provincial governments, would play a pivotal role in ensuring effective tax administration.
Aurangzeb also highlighted progress on the Agriculture Income Tax (AIT) law passed by Punjab’s assembly, with other provinces following suit at varying stages.
Targeting Tax Dodgers
FBR Chairman Langrial shared that 190,000 non-filers have been prioritized for action based on specific criteria, including high bank profits, ownership of luxury vehicles, property transactions exceeding Rs16 million, and significant financial transactions through bank accounts and credit cards.
“Tax compliance gaps total Rs7.1 trillion, comprising Rs4.1 trillion in sales tax, Rs2.4 trillion in income tax, and Rs0.6 trillion in customs duties,” Langrial stated. He estimated that Rs50 to Rs60 billion could be recovered from HNWIs, though acknowledged that the process must follow prescribed legal procedures.
In a breakdown of enforcement efforts, Regional Taxpayer Office (RTO) Lahore issued 38,828 notices, RTO-II Karachi issued 15,000, and LTU Karachi issued just 75 notices. So far, only 38,002 individuals have responded by filing tax returns, contributing Rs377.62 million.
FBR Digitization and Future Goals
The finance minister reiterated the government’s commitment to reforming the tax system. He underscored that reliance on salaried individuals and the formal manufacturing sector for tax revenue was unsustainable. Expanding the tax base to include retailers and other informal sectors was imperative, he said, while projecting an increase in the tax-to-GDP ratio from 9-10 percent to 13.5 percent over the next five years.
Langrial detailed the FBR’s modernization plan, which includes implementing a faceless assessment mechanism to curb collusion in customs operations and strengthening the Pakistan Revenue Automation Limited (PRAL) board. With Rs4 billion allocated for reforms, the FBR plans to hire 550 new auditors to enhance efficiency.
Addressing IMF Concerns
When asked about the potential for a mini-budget or revised tax collection targets amid a Rs0.34 trillion revenue shortfall, Aurangzeb refrained from giving a direct response. Instead, he emphasized the government’s “sincere efforts” to meet IMF expectations and adapt to evolving economic conditions, including easing inflationary pressures.
Aurangzeb concluded by stressing the long-term benefits of broadening the tax base despite short-term challenges, stating, “Our hands are tied, but there is no alternative to plugging revenue leakages.”
