ByThe Federal Board of Revenue (FBR) has expressed significant concern over the glaring disparity between income tax and sales tax compliance during the fiscal year 2023–24. This issue has highlighted the need for more targeted efforts to broaden the tax base and ensure compliance across both categories.
According to a recent FBR report, the total number of active income tax filers reached 4,738,595 during FY24, while only 234,193 individuals and entities filed sales tax returns. This stark difference underscores a serious compliance gap, reflecting both structural challenges and possible inefficiencies in enforcement.
Among the regional offices, the Regional Tax Office (RTO) in Lahore emerged as the leader in tax compliance, reporting 809,131 active income tax filers and 41,783 sales tax filers. This performance highlights Lahore’s prominent role in driving tax compliance nationwide. Karachi followed, with RTO-II reporting 522,284 active income tax filers and RTO-I registering 20,979 sales tax filers. Faisalabad also demonstrated strong results, maintaining its position as a key contributor to the tax base.
In contrast, some specialized tax offices, including the Large Taxpayer Offices (LTOs) in Multan and Islamabad, showed significantly lower numbers of both income and sales tax filers. This trend reflects the specialized nature of taxpayers under these offices, focusing on large-scale entities rather than the broader tax base.
Urban centers continued to dominate the tax landscape, with cities like Lahore, Karachi, and Faisalabad leading in both income and sales tax participation. Smaller cities, such as Sialkot, performed relatively well, showcasing higher ratios of compliance compared to other regions of similar size. However, the uneven distribution of tax compliance across regions points to an urgent need for the FBR to address these disparities.
The active taxpayer-to-sales tax filer ratio further illustrates this imbalance. Despite a high number of active income tax filers, regions with substantial economic activity have not seen a proportional rise in sales tax compliance. This is particularly concerning as sales tax plays a crucial role in revenue collection and economic regulation. Expanding sales tax compliance in regions with high income tax participation remains a critical challenge for the FBR.
The data for FY24 has brought into sharp focus the necessity for policy interventions aimed at enhancing tax compliance. Strengthening enforcement mechanisms, streamlining the sales tax filing process, and promoting awareness about tax obligations may help bridge this gap. The FBR’s efforts will be pivotal in achieving a more equitable and comprehensive tax system in the coming years.
