Karachi, March 29, 2025 – The Federal Board of Revenue (FBR) has initiated a thorough audit of exporters following a notable decline in income tax collection for February 2025.
The move aims to assess tax compliance among exporters and address discrepancies in revenue collection.
According to provisional data from a tax office in Karachi, the collection of advance income tax from exports fell by 16%, amounting to Rs 1.47 billion, compared to Rs 1.75 billion in the same month of the previous fiscal year. This decline has prompted the FBR to scrutinize exporters more closely.
Sources within the FBR revealed that the audit was initiated due to a contradiction between tax revenues and export earnings. The State Bank of Pakistan (SBP) reported a 2.37% rise in export receipts, which increased to $2.59 billion in February 2025 from $2.53 billion in February 2024. The inconsistency between growing exports and falling tax collection raised concerns within the FBR, leading to an extensive review of exporters’ financial records.
The FBR highlighted that significant amendments were made in Section 154 of the Income Tax Ordinance, 2001, through the Finance Act, 2024. Previously, tax collected under Section 154 at a rate of 1% of export proceeds was treated as the final tax on exporters’ income. However, with the latest amendment, this tax is now considered a minimum tax, compelling exporters to declare their full income and assets.
Tax experts explained that the removal of the final tax regime aims to increase transparency and prevent underreporting of earnings by exporters. The FBR believes this policy shift may have contributed to lower tax compliance, necessitating an audit to ensure exporters meet their tax obligations.
Further analysis of advance tax collections from January to February 2024-25 also revealed modest growth. The revenue under this category increased by only 2%, reaching Rs 13.68 billion, compared to Rs 13.46 billion in the corresponding period of the previous fiscal year.
Meanwhile, data from the Pakistan Bureau of Statistics (PBS) indicated a positive trend in overall exports. During July to February 2024-25, exports rose by 8.42%, reaching $22.07 billion, up from $20.36 billion in the same period of the last fiscal year.
With the ongoing audit, the FBR aims to ensure that all exporters comply with the revised tax regulations and contribute fairly to national revenue.