Govt collects Rs620 billion in taxes through electricity bills, NA panel told

The government collects around Rs620 billion in general sales tax and withholding tax through electricity bills, the Federal Board of Revenue informed the National Assembly’s Standing Committee on Finance and Revenue on Wednesday.

Electricity consumers are charged 18% general sales tax, while withholding tax applies when a monthly bill exceeds Rs100,000, officials told the committee.

The committee also approved the Retailers Fixed Scheme despite opposition from Pakistan Peoples Party MNA Sharmila Sahiba Faruqui, who described it as discriminatory and equivalent to a tax amnesty because participants would generally not be audited.

Committee Chairman Syed Naveed Qamar supported the scheme, saying the government needed a starting point to bring the country’s 3.5 million retailers into the tax net.

Faruqui questioned why retailers were being offered protection from audits when taxpayers in other sectors, including salaried individuals, received no similar concessions. She said a comparable scheme introduced in Brazil was compulsory, while Pakistan’s voluntary model was unlikely to succeed.

Minister of State for Finance Bilal Azhar Kiani rejected the suggestion that the scheme amounted to an amnesty. He said Pakistan could not offer a tax amnesty under its commitments to the International Monetary Fund and the Financial Action Task Force.

Kiani said successive attempts to tax retailers had failed since independence and enforcement measures alone were insufficient, prompting the government to introduce a voluntary scheme to encourage registration and compliance.

Federal Board of Revenue Member Dr Hamid Ateeq Sarwar said a tax amnesty typically allows taxpayers to avoid questions about income sources, legalise undeclared income or assets and obtain protection from audits.

He said the retailers’ scheme did not allow participants to conceal the source of their income or whiten undeclared assets. Retailers could also be audited if the Federal Board of Revenue detected major inconsistencies between their declarations, income and assets.

Sarwar said the Compliance Risk Management system was already operational and the Federal Board of Revenue received information from 57 countries, allowing it to identify overseas investments held by Pakistani taxpayers.

He said more than 7.5 million tax returns had been filed, but the Federal Board of Revenue lacked the capacity to audit more than 1% of them. The fixed tax scheme aims to bring two million retailers into the tax net.

The Federal Board of Revenue also briefed the committee on its New Operating Model, which proposes shifting from conventional audits towards taxpayer assessments using artificial intelligence.

Committee members raised questions about the credibility of the proposed system. The National Faceless System will be introduced in phases from October 1, 2026.