FBR Chief rules out mini budget, plans algorithmic detection for tax evasion

ISLAMABAD: Chairman of the Federal Board of Revenue (FBR), Rashid Mehmood Langrial, has dismissed the likelihood of a mini-budget and instead urged businesses to join the tax net and become active filers. He warned of stringent actions against non-compliance, revealing that the top 1% of income earners in Pakistan are underreporting their taxes by approximately Rs1.2 trillion each year.

In an interview with a private television channel, Langrial stated that businesses with sales exceeding Rs100 million were required to register with tax authorities. Those who did not comply would face consequences such as the sealing of business premises, attachment of property, and the freezing of bank accounts. He mentioned that algorithms would be implemented to identify unregistered businesses without needing direct access to banking data.

Langrial also proposed amendments to restrict the use of “Assan accounts” to non-filers, allowing transactions up to Rs1 million, while current and savings accounts would be available only to active taxpayers. Furthermore, non-filers would be prohibited from purchasing property unless they meet specific eligibility criteria based on their declared wealth and income history.

The FBR plans to set limits on property purchases, allowing eligibility at 130% of declared assets, with allowances for gifts, inheritance, and remittances. Individuals who do not meet these criteria will be barred from acquiring property, vehicles, or investing in securities and mutual funds.

Addressing the challenges in revenue collection, Langrial acknowledged a shortfall of Rs340 billion in the first five months of FY25, citing ambitious tax targets and lower-than-anticipated inflation. He said the nominal growth assumptions based on inflation did not materialise, and the growth of large-scale manufacturing was below expectations.

Despite these challenges, the number of tax filers among retailers increased, rising from 0.2 million to 0.6 million by September 2024, largely due to additional taxes imposed on non-filers in the last budget. However, he pointed out that the top 1% of earners, who should owe Rs1.7 trillion in income tax, contributed only Rs0.5 trillion, leaving a significant gap of Rs1.2 trillion.

To enhance enforcement, the FBR plans to hire 1,400 to 1,500 auditors by January 2025 to bolster its audit capabilities. Langrial said improving tax compliance is a gradual process, but the new measures aim to foster a culture of adherence to tax laws.

He was of the view that the past increases in tax rates had not produced significant results, instead, he advocated for better enforcement of existing rates to secure owed taxes.

While the FBR projected Rs0.6 trillion from tax measures in the first five months of FY25, only Rs0.3 trillion was actually collected. Advance taxes imposed on wholesalers amounted to Rs0.49 trillion, but follow-up analyses have been insufficient in meeting revenue expectations.

Web Desk Karachi