AIRLINK 184.92 Decreased By ▼ -0.27 (-0.15%)
BOP 9.61 Decreased By ▼ -0.32 (-3.22%)
CNERGY 7.26 Decreased By ▼ -0.03 (-0.41%)
FCCL 36.43 Decreased By ▼ -0.21 (-0.57%)
FFL 14.34 Decreased By ▼ -0.19 (-1.31%)
FLYNG 24.28 Decreased By ▼ -0.64 (-2.57%)
HUBC 126.41 Decreased By ▼ -0.42 (-0.33%)
HUMNL 12.80 Decreased By ▼ -0.27 (-2.07%)
KEL 4.29 Decreased By ▼ -0.03 (-0.69%)
KOSM 5.94 Decreased By ▼ -0.12 (-1.98%)
MLCF 42.27 Decreased By ▼ -0.62 (-1.45%)
OGDC 198.51 Increased By ▲ 3.07 (1.57%)
PACE 6.08 Decreased By ▼ -0.21 (-3.34%)
PAEL 37.75 Decreased By ▼ -0.21 (-0.55%)
PIAHCLA 17.09 Increased By ▲ 0.19 (1.12%)
PIBTL 7.74 Decreased By ▼ -0.05 (-0.64%)
POWER 9.22 Decreased By ▼ -0.17 (-1.81%)
PPL 168.09 Increased By ▲ 0.20 (0.12%)
PRL 32.75 Decreased By ▼ -1.27 (-3.73%)
PTC 22.42 Decreased By ▼ -0.09 (-0.4%)
SEARL 101.88 Decreased By ▼ -2.09 (-2.01%)
SILK 1.07 Decreased By ▼ -0.12 (-10.08%)
SSGC 35.53 Decreased By ▼ -0.42 (-1.17%)
SYM 17.92 Decreased By ▼ -0.18 (-0.99%)
TELE 8.17 Increased By ▲ 0.15 (1.87%)
TPLP 11.70 Increased By ▲ 0.07 (0.6%)
TRG 66.12 Decreased By ▼ -0.04 (-0.06%)
WAVESAPP 11.79 Decreased By ▼ -0.34 (-2.8%)
WTL 1.53 Increased By ▲ 0.01 (0.66%)
YOUW 3.79 Decreased By ▼ -0.02 (-0.52%)
BR100 11,609 Increased By 39.9 (0.34%)
BR30 34,116 Increased By 81.8 (0.24%)
KSE100 110,323 Increased By 21.8 (0.02%)
KSE30 34,411 Increased By 24.5 (0.07%)

EDITORIAL: The government is proposing the Tax Laws (Amendment) Bill, 2024, which introduces a new category of “ineligible person” with restrictions on buying real estate, cars, bank accounts, and other economic activities. This proposed law has caused a stir among stakeholders.

While the Federal Board of Revenue (FBR) and ministers in the finance division are advocating for it, the National Assembly panel is critically evaluating the proposal.

The business community remains divided — some support the bill, while others are concerned about its broader economic implications.

In principle, there should not be any category for non-tax filers. However, this concept was fostered by authorities, particularly during the Pakistan Muslim League-Nawaz (PML-N) government. The system was introduced in the 1990s and extensively used in the 2010s to collect taxes through higher withholding tax (WHT) rates for non-filers across various categories.

This approach is essentially an implicit amnesty, allowing individuals to evade comprehensive taxation by paying nominally excess amounts as penalty for not adhering to the law. It is important to note that now the PML-N government is attempting to revisit this approach.

However, under the proposed amendment, the non-filer category will remain intact, with higher tax rates unchanged. Instead, the bill introduces a new category titled “ineligible person,” imposing restrictions on certain economic and business transactions. Unfortunately, the proposal lacks clarity in both thought and anticipated outcomes.

The underlying issue is that the FBR is reluctant to forgo substantial revenue collected from non-filers while simultaneously attempting to alienate them. The idiom “Don’t bite off more than you can chew” aptly describes the situation. The amendment is unlikely to lead to any immediate revenue boost.

Instead, it risks empowering corrupt elements in society, including tax evaders and their accomplices within the FBR. The misuse of authority is expected to rise, particularly as FBR officers are pressured to generate additional tax demands. The prevailing assumption treats every individual and business entity as a tax evader, making it the FBR officer’s duty to extract more tax than paid.

FBR officials face immense pressure to meet high collection targets, often resorting to questionable tactics to achieve them. If an officer concludes that a taxpayer is fully compliant, their superiors may view this as incompetence or corruption, resulting in adverse career repercussions.

This culture naturally encourages the creation of frivolous and trumped up demands that fail to withstand the test in appeals made at legal forums.

Legal reforms must be balanced. FBR officials should also be held accountable and penalised in cases of wrongdoing. One-sided measures will only lead to greater extortion and abuse of power within the FBR. Furthermore, such policies are unlikely to significantly increase tax collection.

As the FBR chairman has admitted, tax collection levels in 2024 remain comparable to those in 2008 or 2016 despite significant increases in income and sales tax rates. This stagnant growth has driven more individuals and businesses out of the formal tax system, as evidenced by a sharp rise in currency circulation over the last decade.

Meanwhile, tax collection from under-taxed or untaxed sectors continues to remain low. For example, the real estate market has been severely impacted by higher taxes and valuations, resulting in reduced activity and lower tax revenue from the sector. In response, the FBR has discreetly revised valuation tables downward in some areas where transactions have shown signs of recovery.

Real estate remains a significant avenue for parking untaxed money. While the FBR seeks to curb this practice, it simultaneously makes life more difficult for others. There is concern that these new, draconian measures could lead to capital flight, a phenomenon already contributing to currency instability in 2022 and 2023.

Such laws may have far-reaching economic implications that have not been adequately considered. Therefore, the focus should be on enhancing the FBR’s capacity and addressing corruption before introducing measures that infringe on citizens’ basic rights. Without these foundational improvements, the proposed law risks doing more harm than good.

Copyright Business Recorder, 2025

Comments

Comments are closed.

Aamir Jan 24, 2025 08:43am
Real estate has moved to Dubai and oversees where there are very low tax rates and security. Imaginary taxes like 7E have crippled this sector
thumb_up Recommended (0)
KU Jan 24, 2025 11:49am
A year ago, a parliamentary admitted to Rs.500 billions corruption in FBR but everyone let it pass, n this reflects nature of crime against Pak's economy, including other public sector as well.
thumb_up Recommended (0)
Willow Jan 25, 2025 11:01pm
Businesses are scared of strong arm taxes by FBR. Many have closed down, capital flight has increased. This led to more jobs lost. Empowering the corrupt is bad startegy.
thumb_up Recommended (0)
Faiq Jan 27, 2025 01:40pm
The majority of Pakistanis earn less than 100,000 a month, oftentimes their places of work also actively discourage bank accounts and especially tax filing, as they themselves are tax evaders.
thumb_up Recommended (0)