- FBR chief admits revenue leakage of Rs1.2tr in income tax sector.
- Langrial presented strict measures to improve tax compliance.
- The official admits that falling inflation has affected revenue collection.
ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Langrial has said that the government has no plans to increase tax rates as it would not help in achieving the desired revenue targets .
Speaking on Geo News’ Under the ‘Naya Pakistan’ scheme, the FBR Chairman admitted that there was a revenue leakage of Rs 1.2 trillion in the income tax sector alone because the top 1% of earners richest people in the country were being declared.
Regarding the new tax laws, he mentioned that although the non-filers category has not been completely abolished, it has become inactive. Now only registered filers will be eligible to transact.
Langrial introduced strict measures to improve tax compliance, including sealing the premises of companies with turnover exceeding Rs 100 million if they fail to register.
He said failure to register would also result in the appointment of a receiver to seize properties and freeze bank accounts. He clarified that the FBR would not directly obtain data from banks but would use algorithms to access relevant information when a specific threshold was crossed.
Langrial elaborated on the proposed amendments, stating that only basic ‘Asaan accounts’ would be available to non-active taxpayers. These accounts would have a transaction limit of Rs1 million, while current and savings accounts would be reserved for active filers.
“If someone is not a tax filer, they will not be able to manage a checking or savings account,” he explained.
Langrial stressed that non-filers would not be allowed to purchase property. Even for tax filers, eligibility to purchase property would be determined by their declared wealth.
For example, if a filer declares assets worth Rs10 million but attempts to purchase a property valued at Rs12 million, he will not qualify. Eligibility would be assessed based on the last filed asset statement, with deductions of up to 130% of declared assets. Donations, inheritances or remittances would also be taken into account to determine eligibility.
“For those deemed ineligible, the purchase of properties, vehicles or investments in securities and mutual funds will not be permitted,” Langrial added. Families would, however, be allowed to pool their resources within the prescribed limit to acquire assets.
Langrial admitted that the FBR’s revenue target of Rs 12.97 trillion for the financial year was ambitious, especially considering the assumptions related to large-scale manufacturing (LSM) growth and inflation. Although inflation, as measured by the Consumer Price Index (CPI), fell faster than expected, it had a negative impact on revenue collection because projections were based on nominal growth rather than real.
In the first five months, the FBR faced a revenue shortfall of Rs340 billion, a trend expected to continue until December 2024. Langrial attributed the shortfall to optimistic tax collection targets and the low tax/GDP ratio of the country compared to international standards.
He noted that some policy measures have shown progress, citing an increase in the number of retail tax return filers from 0.2 million to 0.6 million in September 2024. However, despite the FBR’s efforts, the total number active filers stands at 5.5 million, well below the potential of 11 million.
The FBR chief highlighted significant revenue leakages among the top 1% of taxpayers. Out of 0.67 million people falling into this category, only 0.2 million tax filers contributed Rs 0.5 trillion towards income tax, leaving Rs 1.2 trillion of potential income uncollected due to under-declaration and tax evasion.
“If the richest 1% paid their taxes in full, an additional Rs 1.2 trillion could be collected,” he said.
Langrial acknowledged that simply increasing tax rates was not effective and stressed the importance of ensuring compliance with existing rates. He revealed that the FBR would recruit between 1,400 and 1,500 new auditors to strengthen its auditing capacity by January 2025.
“Tax enforcement cannot be strengthened overnight, but these measures will foster a culture of compliance,” he noted.
The FBR’s recent tax measures, including an advance tax on wholesalers, have failed to meet expectations. The projected revenue of 0.14 trillion rupees from this measure yielded only 0.49 trillion rupees, indicating gaps in implementation and analysis.
Langrial acknowledged that the rapid decline in inflation had also affected revenue collection, but expressed optimism that LSM growth in the third and fourth quarters, alongside reductions in policy rates, could offset the deficit current.
He concluded by reiterating the need to focus on under-filing and non-compliant taxpayers, rather than imposing new taxes or increasing rates.