Combating Tax Avoidance, A Mission for the FBR

FBR and Policymakers in Pakistan are concentrating their efforts on obtaining the greatest amount of tax revenue from current taxpayers rather than focusing on tax evaders and the collection of the Gas Infrastructure Development Cess as the nation struggles with one of the worst economic crises in its history (GIDC).

Due to a reduction in economic activity and the FX crisis, data from the Federal Board of Revenue (FBR) indicates that tax receipts are projected to fall Rs170 billion short of the goal this fiscal year. In contrast to the aim of Rs7,470 billion, experts predict that the FBR will only be able to collect Rs7,300 billion in taxes.

“The economy is dealing with both an internal and external deficit. The government’s plan is to increase the petroleum levy and raise more taxes through a mini-budget in order to curb these deficits, the experts continued.

Speaking to The Express Tribune, Foundation Securities Limited Head of Research, Muhammad Awais Ashraf said, “The policymakers and FBR are increasing the tax burden which will further agonize the low-income group, already bearing the burden of high inflation. However, in the short term, the GIDC collection could close the budgetary gap that the administration hopes to close with the mini-budget.

The cost of industries and the manufacturing sector is rising as a result of the government’s growing reliance on organized sectors for tax collection, he claimed. In order to collect more taxes from the tax-paying sectors that are now paying less than their potential and bring non-paying sectors into the tax net, according to Ashraf.

Because of unlawful commerce and tax evasion, the tobacco industry, for instance, is one of the industries that puts the most strain on the national exchequer and restricts the business of the organized sector that pays taxes.

According to analysts, two out of every five cigarettes sold in Pakistan are sold through tax evasion, making Pakistan one of the top countries in Asia for illegal cigarette trade, he stated. The illegal cigarette trade costs the national exchequer Rs100 billion each year.

“A track-and-trace system has been implemented to eliminate tax fraud from five important sectors, including cigarettes, cement, sugar, fertilizer, and petroleum,” Ashraf explained. Tax receipts will grow if this approach is widely adopted throughout the tobacco business.”