FBR proposes stringent actions against tax evaders amid IMF pressure

The Federal Board of Revenue (FBR) has proposed stringent actions against millions of tax evaders, including freezing bank accounts, prohibiting the purchase of properties and vehicles, and disconnecting electricity and gas services. 

These measures are part of an effort to address a significant tax shortfall in the first quarter of the fiscal year, driven by the $7 billion IMF Extended Fund Facility (EFF) programme.

FBR officials revealed that after failing to bring 3.2 million retailers into the tax net, they are now targeting two million nil filers out of a total of six million return filers. 

To address this, the FBR has suggested categorizing non-filers into three distinct groups and recommending fines of Rs1 million for incorrect or incomplete tax returns. These proposals would require approval from parliament, likely through a mini-budget or a new ordinance.

In one of the proposed categories, nil filers would face immediate action, including frozen bank accounts and a ban on the purchase of properties or vehicles. 

Individuals evading tax payments between Rs0.5 million and Rs1 million could see their electricity and gas connections cut off. 

Additionally, the FBR had previously ordered the disconnection of mobile phones for 0.5 million non-filers but did not achieve the expected results.

For larger tax dodgers—those under-reporting taxes by Rs1 million or more — the FBR has suggested implementing even stricter measures. It has also recommended new policies targeting inaccurate tax returns, applying to all tiers of taxpayers, including retailers and manufacturers, and covering both Sales Tax and Income Tax. 

To improve enforcement, the FBR proposed third-party monitoring, enhanced use of artificial intelligence, and money-laundering-assisted audits.

Internal FBR assessments indicate a tax shortfall of over Rs220 billion for the first quarter (July-September) against a target of Rs2,652 billion. The annual tax collection goal, set at Rs12,970 billion, was approved by parliament and agreed upon with the IMF for the current fiscal year. 

The FBR reported a Rs98 billion shortfall in August 2024, having collected Rs1,456 billion in the first two months, short of the Rs1,554 billion target.