The Federal Board of Revenue (FBR) has revealed that a staggering 71 percent of corporate return-filing entities declared annual income of less than Rs500,000 for tax year 2018. This alarming figure points to a serious compliance and revenue generation gap within Pakistan’s corporate sector.
According to the detailed FBR report issued on September 18, 2020, only 44,609 companies filed their income tax returns for the year 2018, despite over 87,000 companies being registered with the Securities and Exchange Commission of Pakistan (SECP) by the end of June 2018. This indicates that nearly half of registered companies failed to fulfill their legal obligation of return filing under the Income Tax Ordinance, 2001.
The report further breaks down the income levels of these return-filing companies, exposing how a large majority report minimal earnings. Out of the total filers, around 31,561 companies, or 71 percent, disclosed annual income under Rs500,000. This suggests either low profitability or potential underreporting in a significant segment of the corporate base.
Only 1,167 companies (2.62 percent) declared income between Rs500,000 and Rs1 million, while 907 companies (2.03 percent) reported income between Rs1 million and Rs1.5 million. A slightly higher number, 1,357 companies (3.04 percent), stated earnings between Rs1.5 million and Rs3 million. Another 876 (1.96 percent) declared between Rs3 million and Rs5 million in taxable income, and 552 (1.24 percent) fell into the Rs5–7 million income range.
On the higher end of the spectrum, only 3,380 companies, or 7.58 percent, reported income exceeding Rs7 million. Additionally, around 4,890 companies filed returns under the final or fixed tax regime, which may limit detailed income disclosures.
The data underscores a glaring mismatch between corporate registrations and tax compliance, highlighting the need for robust audit, enforcement, and reform measures. FBR officials believe that tightening enforcement, encouraging digital invoicing, and revisiting corporate audit frameworks may help bring more companies into meaningful compliance and expand the tax net.