KARACHI, May 9, 2024 – The Federal Board of Revenue (FBR) is considering new measures for the 2024-25 budget to combat benami (anonymous) transactions in the automobile sector and to enhance tax collection across various sectors.
As part of the proposals received by FBR, a significant change could come in the form of a cap on the number of cars an individual taxpayer can register. To prevent the misuse of filer statuses, where non-filers use the names of filers to register vehicles, a maximum ownership cap of ten cars per filer is being proposed. This move aims to tighten regulations around vehicle ownership and reduce tax evasion through benami transactions.
Beyond the automotive sector, the proposals extend to broader financial realms including real estate and agriculture, where substantial untaxed potential remains. Stakeholders have suggested implementing a tax on real estate which could unlock an estimated Rs 50 billion by tapping into just 10% of the sector’s untaxed potential.
In agriculture, the proposals call for stricter enforcement of existing tax laws. If taxes are not paid to provincial authorities, it is suggested that the federal government should have the authority to collect these taxes. Additionally, even if taxes are paid at the provincial level, a federal tax return should be filed accompanied by a wealth reconciliation. This is aimed at addressing the issue of parking or whitening of non-tax paid and illicit money in the sector. The enforcement of wealth statements, already a requirement, is also emphasized in the proposals.
The stakeholders have further recommended that the FBR should publicize the sales tax payments of prominent restaurants to ensure they are declaring their full sales and appropriately paying income taxes. This transparency is expected to encourage tax compliance and enhance revenue from sectors that are perceived to be under-reporting their earnings.
To address the issue of temporary tax registration, it has been suggested that deregistration should not be allowed within five years of registration, except in cases such as death or bankruptcy. This measure is designed to prevent individuals from registering for income tax solely to benefit from reduced withholding rates on transactions like property or vehicle sales, and then deregistering or failing to file returns in subsequent years.
Another significant proposal includes stringent measures for those registered for income tax who fail to file returns for three consecutive years. For such cases, it is proposed that the individual’s passport be blocked to restrict foreign travel, thereby enforcing tax compliance.
These proposals reflect a comprehensive effort by the FBR to tighten tax regulations and close loopholes that allow for tax evasion. By introducing these measures, the FBR aims to enhance tax collection efficiency, broaden the tax net, and ensure economic equity. As the budget formulation progresses, these proposals will undergo further review and refinement to best suit Pakistan’s fiscal needs and economic realities.
