Repeated failures in enforcing minimum tax laws expose persistent weaknesses in FBR’s compliance and enforcement framework
ISLAMABAD: A recent audit report has uncovered tax evasion exceeding Rs23.2 billion by 1,652 taxpayers, highlighting serious shortcomings in enforcement and recovery efforts by the Federal Board of Revenue (FBR) and raising fresh concerns over revenue leakages in Pakistan’s tax system.
According to the audit findings for fiscal years 2022-23 and 2023-24, a large number of taxpayers failed to pay minimum tax liabilities despite being legally required to do so under Section 113 of the Income Tax Ordinance, 2001.
The law requires specified taxpayers to pay a minimum tax based on turnover where no tax is payable under the normal tax regime or where the tax liability calculated under normal provisions falls below the prescribed minimum threshold.
The audit, conducted across 22 FBR field formations, identified widespread violations of the minimum tax provisions. It found that 1,652 taxpayers either failed to pay or underpaid their tax obligations, resulting in non-realisation or short-realisation of government revenue amounting to Rs23.203 billion.
Auditors noted that despite clear tax liabilities, the relevant tax authorities did not initiate timely and effective legal proceedings to recover the outstanding amounts, allowing significant revenue losses to persist.
The irregularities were brought to the attention of tax authorities between February and November 2024. In response, the department informed auditors that Rs328.13 million had been recovered, while tax liabilities worth Rs1.086 billion had been assessed but remained pending recovery.
According to the report, legal proceedings have been initiated in cases involving Rs19.966 billion, but these matters have yet to reach final resolution. Additionally, tax demands amounting to Rs1.823 billion remain under litigation before various judicial and appellate forums.
The Departmental Accounts Committee (DAC), during meetings held between July 2024 and January 2025, directed the concerned authorities to expedite recovery efforts, pursue pending legal cases vigorously, and submit compliance reports to both the Audit Department and the FBR.
However, the audit report observed that no meaningful progress had been reported by the time of finalisation of the audit, casting doubt on the effectiveness of follow-up actions and enforcement mechanisms.
Audit authorities recommended immediate recovery of admitted liabilities, accelerated disposal of pending proceedings, and stronger legal pursuit of cases under litigation. The report also called for enhanced desk audit functions and improved monitoring systems to prevent similar revenue leakages in future.
The audit further highlighted that the issue is recurring rather than isolated. Similar observations relating to non-enforcement of minimum tax provisions were reported in audit reports for audit years 2019-20, 2020-21, 2021-22, 2022-23, and 2023-24, involving a cumulative financial impact of Rs47.906 billion.
The repeated occurrence of the same irregularity over multiple years, despite previous audit observations and departmental directives, has been described as a matter of serious concern. The findings underscore persistent weaknesses in tax administration, compliance monitoring, and revenue enforcement, raising questions about the effectiveness of measures taken to safeguard public revenues.
With Pakistan facing continued fiscal pressures and ambitious revenue collection targets, the audit report is likely to intensify scrutiny of the FBR’s ability to enforce tax laws, recover outstanding liabilities, and strengthen compliance across the tax base.
