Karachi, January 15, 2025 – A startling revelation has emerged from the Federal Board of Revenue’s (FBR) official tax collection data, exposing that the vast network of FBR officials contributed a mere 2% to the overall tax collection efforts.
This revelation highlights a pressing need for systemic reforms within Pakistan’s premier tax authority.
The FBR’s tax collection report for the fiscal year 2023-24 underscores the board’s overwhelming dependence on voluntary payments and automated mechanisms, such as withholding taxes and advance tax systems, for revenue generation. Astonishingly, the direct tax collection through audit-driven efforts amounted to only Rs 127 billion, representing a meager 1.37% of the total direct tax revenues. The audit process, aimed at uncovering arrears and generating current demand, has thus delivered limited returns. The FBR acknowledged the need for field formations to intensify efforts in recovering outstanding tax demands.
A deeper analysis of the data reveals that total sales tax collection during 2023-24 stood at an impressive Rs 3,087 billion. However, Rs 1,846 billion of this was generated at the import stage, while Rs 1,223 billion came from domestic supplies. Notably, the electricity and petroleum (POL) sectors contributed Rs 365 billion and Rs 145 billion, respectively, to the sales tax revenue.
Taxpayers, practitioners, and other stakeholders have questioned the efficacy of FBR’s operations. Alarming figures reveal that out of approximately 260,000 manufacturers in the country, only 42,000 are registered with the FBR. This glaring discrepancy points to gaps in enforcement and compliance mechanisms.
Despite this underwhelming performance, the FBR recently announced plans to procure 1,010 new vehicles for its field staff to enhance enforcement capabilities. Critics argue that many Inland Revenue Service (IRS) officers already have department-provided vehicles, while also receiving conveyance allowances.
Over the past decade, the FBR has seen 15 chairmen, each promising significant reforms in tax collection. Although tax revenues have grown, the tax-to-GDP ratio remains below double digits, a metric that underscores the inefficiency of the existing tax administration framework. The urgent need for robust reforms and accountability within the FBR is imperative to bolster Pakistan’s fiscal health and economic stability.