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Tag: FBR

  • FBR restructuring: 145 offices set up to add 2 million new taxpayers

    FBR restructuring: 145 offices set up to add 2 million new taxpayers

    In a bid to streamline operations, the Federal Board of Revenue (FBR) has set up 145 district tax offices, aiming to bring in 1.5 to 2 million new taxpayers by June 2024. 

    Highlighting the significance of revenue and the need to increase the number of tax filers, the Prime Minister also stressed these goals in recent meetings.  

    The initiative is geared towards expanding the tax base, ultimately achieving the desired tax-to-GDP ratio. 

    Heading these offices are district tax officers responsible for compelling income tax returns from non-filers and preventing lapses from existing filers.  

    This marks a pivotal step in bridging the critical tax gap and incorporating all potential taxpayers into the system. 

    The newly established offices, led by dedicated Inland Revenue Officers in BS-17/18, will leverage third-party data obtained from various departments to track information on asset investments and significant expenditures by potential taxpayers.   

    This approach aims to curtail avenues for individuals evading taxation, particularly in terms of registration and filing returns. 

    The department will invoke the recently introduced Section 114B in the Income Tax Ordinance, 2001, to enforce compliance, enabling it to disconnect utility connections (such as electricity and gas) and block mobile SIMs if returns are not filed in response to issued notices. 

    A new documentation law is also in the works to mandate agencies and departments to provide data to the FBR through an automated common transmission system. 

    The Federal Board of Revenue has sought collaboration with the National Database and Registration Authority (NADRA), and the Chairman of NADRA is ensuring assistance for the expansion of the tax base through data integration. 

    This comprehensive initiative not only strengthens the FBR’s capacity to enforce tax laws but also facilitates taxpayers by establishing dedicated offices, ultimately fostering a more efficient and effective taxation system. 

  • FBR restructuring: Govt plans to separate Customs and revenue collection system

    FBR restructuring: Govt plans to separate Customs and revenue collection system

    Caretaker Finance Minister Dr Shamshad Akhtar has announced that the government is implementing significant restructuring measures within the Federal Board of Revenue (FBR) to eliminate apparent conflicts of interest in tax collection and enhance overall performance. 

    Speaking at the Future Summit organised by the Nutshell Group, she outlined the action plan for restructuring Pakistan’s tax administration, emphasising the crucial aspect of strengthening the internal governance of the FBR. 

    One notable decision involves separating customs from the revenue collection mechanism. Customs will focus on tracking smuggling and related activities, while revenue collection will remain the exclusive mandate of the FBR. 

    Akhtar noted that a formal notification for this change will be issued next week, with additional notifications expected for further FBR restructuring initiatives. 

    Discussing FBR reforms, Akhtar highlighted the adoption of innovative digital technologies to broaden the tax base, minimise the tax policy and compliance gap, and increase tax collection. 

    The government aims to reduce the share of the shadow economy by more effectively identifying non-filers and those under-reporting incomes or business activities. 

    Furthermore, Akhtar revealed plans to separate the tax policy and revenue division, making it an independent entity reporting directly to the Minister of Finance. 

    According to Brecorder, this move aims to eliminate perceived conflicts of interest in tax collection, emphasising the need for fair, equitable, and productive tax policy design. 

    Collaboration with the National Database and Registration Authority (NADRA) is also underway to upgrade data systems, with a technical committee chaired by NADRA and FBR chairpersons established for this purpose. 

    The overall objective is comprehensive tax administrative reforms and increased efficiency in revenue collection. 

  • IMF pressures Pakistan for tax reforms, calls for intensified recovery efforts

    IMF pressures Pakistan for tax reforms, calls for intensified recovery efforts

    The International Monetary Fund (IMF) is urging Pakistan to intensify efforts towards tax recovery. 

    Specifically, the IMF calls for increased income tax collection from retailers and the real estate sector, alongside a heightened focus on agriculture income. 

    The IMF emphasises collaborative actions between the federal government and provinces to enhance tax recovery, considering the imposition of a fixed tax on retailers in case of collection shortfalls after December. 

    Additionally, the IMF recommends consultations with provinces for taxing agriculture and real estate. Proposals for tax policy amendments and addressing taxation flaws have been extended to the Federal Board of Revenue (FBR) by the IMF mission, emphasising effective taxation policies and enforcement in sectors with insufficient tax recovery. 

    The FBR has presented a revenue projection report to the IMF team for the current fiscal year, with the IMF expected to respond by Saturday. During the discussions, the FBR briefed the IMF on the task force dedicated to tax policy and administration. 

    As part of an agreement with the IMF, Pakistan commits to sharing data on tax evaders through collaboration with the FBR, banks, and NADRA, aiming to enhance overall tax collection. 

    This agreement was reportedly reached during policy review talks, facilitating the release of a $700 million loan tranche under the Standby Agreement (SBA).

  • Largest money laundering scandal: FBR exposes Rs47 billion trade-based fraud 

    Largest money laundering scandal: FBR exposes Rs47 billion trade-based fraud 

    The Federal Board of Revenue (FBR) in Pakistan has uncovered a massive case of money laundering and under-invoicing in the trade industry, making it one of the country’s biggest financial scandals. 

    Following a thorough investigation by auditors, the FBR took legal action against two companies based in Peshawar. They found that these companies were involved in a staggering money laundering operation worth Rs47 billion, which they officially termed ‘trade-based money laundering.’ 

    According to the FBR’s report, these companies allegedly caused a massive financial loss of Rs25 billion to the national exchequer by under-invoicing transactions, all under the guise of dealing with solar panels. 

    In the FIR, the owners of these companies, Moon Light Traders and Bright Star, were named as suspects. The report revealed that Bright Star had been involved in under-invoicing since 2013, while auditors scrutinised records of 705 Goods Declarations (GDs) related to Moon Light Traders. 

    Furthermore, it was discovered that these companies continued their money laundering activities from 2017 to 2022. According to ARY News, the FBR promptly shared its report on trade-based money laundering and under-invoicing with the Caretaker Prime Minister, Anwaarul Haq Kakar. 

    In a separate incident in September, the FBR exposed a massive tax fraud worth Rs314 billion perpetrated by a fictitious company called K H & Sons. This fraud was uncovered by the Director-General of Internal Audit at Inland Revenue’s team. 

    Interestingly, K H & Sons was a paper company registered under the name of a Benami individual, Muhammad Kashif. Their fabricated documents falsely claimed to be in the iron and steel business, using addresses of legitimate markets like Liaquat Market, Agri Market, and M.A. Jinnah Market. 

    Sources also revealed that this bogus company was used for various illegal activities. What’s surprising is that despite the large-scale tax fraud, the FBR had not taken legal action against the culprits, leading to concerns that they might flee the country if a First Information Report (FIR) was not filed promptly. 

  • FBR exceeds revenue target by Rs63 billion for first three months of current fiscal year 

    FBR exceeds revenue target by Rs63 billion for first three months of current fiscal year 

    In the initial quarter of the ongoing fiscal year, the Federal Board of Revenue (FBR) successfully amassed a total of Rs2,041 billion, significantly surpassing the stipulated target of Rs1,978 billion by an impressive margin of Rs63 billion. 

    Furthermore, the FBR exhibited commendable dedication and diligence in pursuit of its revenue goals for the month of September 2023. Despite setting a target of Rs794 billion, the FBR managed to accumulate a noteworthy sum of Rs834 billion, as opposed to the Rs688 billion collected during the corresponding period in 2022. 

    Additionally, the FBR issued refunds totaling Rs37 billion, a notable increase compared to the Rs18 billion issued in September 2022. 

    Nonetheless, it is important to note a considerable reduction in import activities during September 2023, with taxes collected at the import stage amounting to Rs254 billion, down from the previous month’s figure of Rs299 billion. According to ARY News, this deficit of Rs45 billion was effectively compensated for through the collection of domestic taxes, particularly direct taxes. 

  • No extension for tax return deadline, only commissioner-requested extensions accepted

    The Federal Board of Revenue (FBR) has officially announced that the deadline for income tax return submissions remains unchanged, concluding on September 30.

    However, individuals may request an extension of up to 15 days by submitting an application to their respective commissioner.

    FBR officials report that over 1.7 million tax returns have already been filed, with expectations of the total reaching over Rs2 million by the September 30 deadline.

    More to follow..

  • PIA bank accounts frozen over non-payment of excise duty

    PIA bank accounts frozen over non-payment of excise duty

    On Thursday, the Federal Board of Revenue (FBR) froze 13 bank accounts of Pakistan International Airlines (PIA) after the airline failed to pay Rs8 billion in Federal Excise Duty (FED).

    PIA bank accounts that are associated with the International Air Transport Association (IATA) will also be frozen, FBR officials added.

    “A decision has been made to register a first information report (FIR) against PIA officials for not submitting the FED,” said FBR officials, adding that the duty tax was not submitted despite the accounts being restored last month.

    A PIA spokesperson has said that freezing of bank accounts will not affect PIA’s flight operations.

    “There is contact at the government level. PIA’s accounts will be restored soon,” the spokesperson added.

  • FBR misses July 2023 revenue target by Rs2 billion, collecting Rs532 billion in taxes

    FBR misses July 2023 revenue target by Rs2 billion, collecting Rs532 billion in taxes

    The Federal Board of Revenue (FBR) has announced that the tax revenues collected for the month of July 2023 amounted to Rs532 billion, slightly falling short by Rs2 billion of the target set for this period.

    This figure reflects a noteworthy increase of 15 per cent year-on-year, compared to the Rs462 billion collected in July 2022.

    However, when examining the data on a monthly basis, there was a significant decline of 43.52 per cent as the tax revenue for July 2023 dropped compared to the Rs942 billion collected in the previous month.

    Looking ahead, the government has set a revenue collection target of Rs9.415 trillion for the fiscal year 2023-2024.

     It is worth recalling that in the previous fiscal year 2022-2023, the FBR failed to meet its annual budgetary collection target by approximately Rs522 billion, as it collected Rs7.118 trillion by June 27, 2023, in contrast to the projected amount of Rs7.64 trillion for the entire fiscal year.

  • FBR imposes 400% tax increase on payments to non-residents via debit and credit cards

    The Federal Board of Revenue (FBR) has taken a significant step to discourage the outflow of foreign exchange reserves by raising the withholding tax (WHT) on payments to non-resident individuals through debit and credit cards. The move aims to curtail the substantial impact of such payments on the country’s foreign exchange reserves.

    The FBR recently issued Circular Number 2 of 2023, which outlines the amendments to the Finance Act 2023. As per the circular, the Finance Act 2022 had introduced section 236Y, subjecting payments to non-residents through debit/credit cards to a 1 per cent withholding tax rate for Active Taxpayer List (ATL) persons and 2 per cent for Non-ATL persons.

    However, considering the considerable foreign exchange outflows resulting from these transactions, the FBR has implemented a drastic increase in withholding tax rates through the Finance Act 2023. According to The News, for ATL persons, the withholding tax rate has been elevated from 1 per cent to 5 per cent, and for Non-ATL persons, it has been raised from 2 per cent to 10 per cent. This means a fourfold increase in tax rates for both categories of taxpayers as well as non-filers.

    According to estimates shared by the State Bank of Pakistan (SBP) with parliamentarians before the 2023-24 budget, monthly payments made through credit cards or debit cards amounted to approximately $70 to $100 million, resulting in an annual outflow of around $1 billion.

    In line with the Finance Bill, the FBR has been granted powers under Section 236Y to levy advance tax on individuals remitting amounts abroad through credit, debit, or prepaid cards. As per the Finance Bill 2022, the proposed advance tax rate on such remittances was set at 1 per cent of the gross amount remitted abroad.

    The implementation of the increased withholding tax is expected to have a considerable impact on curbing unnecessary foreign exchange outflows and strengthening the country’s forex reserves. It also serves as a measure to encourage individuals to transact responsibly and ensure the stability of the country’s economic landscape.

    As the FBR takes these steps to address forex challenges, stakeholders and taxpayers await the outcomes and potential adjustments in the overall economic landscape. The move also highlights the government’s efforts to strike a balance between promoting foreign investments and managing capital outflows to ensure sustainable economic growth in the country.

  • FBR freezes PIA’s bank accounts for not paying Rs2.8 billion in taxes

    FBR freezes PIA’s bank accounts for not paying Rs2.8 billion in taxes

    Pakistan International Airlines (PIA), the national flag carrier, has found itself embroiled in a tax dispute as the Federal Board of Revenue (FBR) took the drastic step of freezing the airline’s bank accounts. This move comes at a critical time when the government has shifted the burden of revenue generation onto the general public, leading to growing concerns about the fairness of the taxation system.

    According to the FBR, PIA owes approximately Rs2.8 billion in taxes. However, the airline disputes this figure, claiming that the amount owed stands around Rs1.3 billion. A PIA spokesperson confirmed the ongoing communication between the airline’s management and the FBR, expressing hope that the bank accounts would be unblocked in the near future.

    Despite the harsh measure taken by the FBR, the PIA spokesperson reassured the public that the airline’s flight operations and other activities were continuing to function smoothly.

    The situation with PIA not paying taxes raises questions about the government’s tax collection policies. A recent report from the Finance Division revealed that government expenditure was on the rise in FY23, largely due to increased revenue collection through non-tax measures and indirect taxes. This indicates a failure to effectively broaden the tax base and implement direct taxation for various sectors.

    Critics argue that the government’s approach seems to focus on imposing indirect taxes on the masses, while offering some protection to the wealthier classes, even amid the current financial crunch. The freezing of PIA’s bank accounts further reinforces this perception, leaving the public questioning the fairness of the taxation system.

    Meanwhile, the report also highlighted that the government’s interest rate hikes policy is facing opposition, particularly from the business community. The State Bank of Pakistan has been unwilling to reverse the rate hikes, despite continuous protests and grave consequences faced by the public.

    As the PIA tax dispute continues, the government is under pressure to address the broader issues surrounding taxation and revenue generation to create a more equitable and sustainable financial framework.