FBR Reaffirms Plan to Freeze Bank Accounts of Tax Defaulters

FBR Building

Islamabad, October 2024 – Rashid Mehmood Langrial, Chairman of the Federal Board of Revenue (FBR), has reiterated the government’s resolve to freeze the bank accounts of individuals who fail to file their income tax returns.

In a candid interview with a private TV channel, FBR Chairman underscored the government’s determination to eliminate the category of non-filers and tighten the noose around tax evaders engaging in significant financial transactions.

FBR Chairman Langrial clarified that while the average citizen will still be able to purchase smaller assets such as plots or used vehicles, individuals engaging in large-scale transactions will face severe restrictions. Those who fail to file their tax returns by the final deadline of October 14, 2024, will be subjected to stringent penalties, including a ban on purchasing properties exceeding Rs10 million, the acquisition of new vehicles, and the freezing of bank accounts. The government is even contemplating restrictions on air travel for persistent non-filers, in line with international practices where such punitive measures extend to up to 15 different types of sanctions.

Langrial highlighted that under-filing—where individuals or corporations misreport their income to evade taxes—remains a substantial issue in Pakistan’s tax system. With only three million individuals paying taxes in a nation of over 240 million, he acknowledged that the widespread poverty reduces the pool of potential taxpayers. However, the FBR’s analysis has identified a significant portion of the population that is deliberately under-reporting income to avoid paying their fair share of taxes.

He provided stark examples from the corporate sector, where companies operating in the same industry exhibit glaring discrepancies in their tax declarations. For instance, in the cement sector, one company declared coal costs at Rs3,500 per ton, while another declared Rs5,000 per ton—a disparity that points to tax evasion. Similarly, in the beverage industry, some companies report sugar inputs as low as 3-4%, while others report as high as 16%, raising suspicions about the accuracy of their financial reporting.

Langrial condemned such deceptive practices, equating them to criminal acts, and reaffirmed the FBR’s stance against tax amnesties. He also highlighted the challenges faced by field officers, whose minimal salary packages hinder their ability to effectively combat tax evasion. To address this, he has requested the Prime Minister to enhance the mobility and resources of tax enforcement officers.

Smuggling was also flagged as a significant issue undermining the country’s tax revenues. Langrial emphasized that while the FBR’s comprehensive reform plan has been approved, its implementation will take several months, as procedural and legislative changes must be enacted.

He concluded by outlining the potential for Pakistan’s tax-to-GDP ratio to rise significantly. With targeted reforms and the provinces contributing more effectively, Langrial projected that the country could achieve a tax-to-GDP ratio of 18%, helping to stabilize the economy and increase revenue collection for the state.