The Federal Board of Revenue (FBR) chairman, Zubair Tiwana, revealed a concerning tax deficit issue in Pakistan, with approximately 15 million individuals, including agricultural income earners, currently evading taxation. During a recent meeting of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla, Tiwana emphasized that this sizable portion of the population remains outside the tax net.
FBR officials clarified that there are currently no policy proposals under consideration to change the existing exemption threshold for both salaried and business individuals, which stands at Rs600,000 per annum. Furthermore, the World Bank’s recommendation to lower this threshold limit for this class of individuals has not been heeded by the FBR.
In the meeting, the FBR Chairman acknowledged that 75 percent of the tax revenue is contributed by just 13pc of the population.Â
In response to a question, Mr. Tiwana explained that it is not feasible to impose taxes on low-income individuals. However, he expressed hope that the tax deficit could be substantially reduced if 15 million potential taxpayers “fulfil their obligations.” He informed that the number of taxpayers had reached 4.9 million, with 1.2 million individuals added to the tax net in the previous year.Â
Despite agriculture contributing 40pc to the national income, Tiwana pointed out that this sector does not significantly contribute to tax revenue. However, he emphasized that the issue of agricultural taxation falls outside the purview of the FBR, as it is a provincial subject. He also highlighted the absence of a significant number of housewives in Pakistan from the tax roll, indicating another potential area for tax expansion.
Senators Kamil Ali Agha and Mohsin Aziz requested the FBR to provide insights into the tax collection process from taxpayers, as well as contributions from both direct and indirect taxes. The committee also showed interest in understanding the impact of smuggling on tax evasion.
