Pakistan's tax gap has exceeded Rs7tr, reveals FBR chairman

In a rather concerning revelation amid prevailing economic indicators, Federal Bureau of Revenue (FBR) Chairman Rashid Mahmood Langrial has disclosed that the country's tax gap has stood at Rs7.1 trillion.

Langrial, while speaking at a press conference in Islamabad on Thursday, further pointed out that the income tax gap stood at Rs2.4 trillion.

Underscoring the reforms in the tax sector, Langrial revealed that the tax authority issued notices to 19,000 people, out of which 38,000 submitted their tax returns amounting to Rs370.7 million.

"Our focus is on the top five per cent," he said while warning that action would be taken against those who didn't file their tax returns.

Flanked by Federal Finance Minister Muhammad Aurangzeb, Minister of State for Finance and Revenue Ali Pervaiz Malik and Information Minister Attaullah Tarar, the FBR chairman underscored the reforms in the tax sector, saying that the authority was digitising the invoicing process and was digitally monitoring the sugar industry.

Meanwhile, speaking on the occasion, Finance czar Aurangzeb said that the government intends to increase the country's tax to gross domestic product (GDP) ratio from 9-10% to 13.5% via the recently tabled Tax Laws (Amendment) Bill, 2024.

"We have to achieve this tax-related target in three years," he remarked while highlighting the need to curb tax evasion and formalise the informal sector.

The federal minister further added that the existing potential for more tax stood at Rs71 billion.

Furthermore, shedding light on the need to increase tax resources and control deficits, State Minister Malik revealed that the tax returns increased from three million to five million by the end of October.

Tax Laws (Amendment) Bill, 2024

The presser comes days after Aurangzeb introduced the aforementioned legislation seeking to bar non-filers from purchasing cars above 800cc and opening bank accounts.

The bill, tabled in the National Assembly on December 18, proposes that non-filers will not be allowed to buy property beyond a certain limit.

It also that non-filers will be banned from purchasing shares above a certain limit and won't be allowed to open a bank account.

As per the proposed legislation, non-filers will not be able to make transactions through a bank beyond a certain limit. However, they will be allowed to buy motorcycles, rickshaws and tractors.

Moreover, bank accounts of the non-registered business persons will be frozen and they will be banned from transferring property. The amendment also proposed that the government will be authorised to seal the property and business of non-filers.

Furthermore, freezing of accounts of those included in the list of FBR has also been proposed.