FPCCI Estimates Rs 50 Trillion Untaxed Money in Pakistan

FPCCI Estimates Rs 50 Trillion Untaxed Money in Pakistan

PkRevenue.com – Pakistan’s top trade body, the Federation of Pakistan Chambers of Commerce and Industry (FPCCI), has unearthed a colossal amount of untaxed money circulating within the country – a staggering Rs 50 trillion.

This estimation places the size of Pakistan’s untaxed economy at a staggering level. The FPCCI proposes a flat tax rate of 10% for those who have previously evaded taxes. This, they believe, has the potential to generate a significant Rs 5 trillion in revenue for the Federal Board of Revenue (FBR) within a year, with a total potential of Rs 14 trillion.

“This projected revenue could significantly surpass the FBR’s collection of Rs 9.40 trillion in the current fiscal year 2023-24,” the FPCCI report highlights.

Pakistan’s tax collection system faces a stark reality. During the tax year 2021-22, the FBR managed to collect Rs 1.6 trillion in income tax. Shockingly, a mere 13,958 taxpayers shouldered a massive 75% of this total, contributing a staggering Rs 1.194 trillion. These 13,958 individuals represent a minuscule fraction of the population – only 0.39% of return filers and a miniscule 0.005% of Pakistan’s total population.

The FPCCI report sheds light on a significant portion of Pakistan’s economic activity operating under the radar, evading taxes and escaping detection by authorities. This shadowy realm, often termed the “black economy,” encompasses activities like smuggling, corruption, and other illicit practices aimed at dodging taxes. Tax evasion, which involves any illegal actions taken to avoid legitimate tax payments, further inflates the size of this informal economy, the FPCCI added.

Enlarging Pakistan’s registered tax base has proven to be a persistent challenge. For many years, the number of registered taxpayers has stagnated at an alarmingly low level, representing less than one percent of the total population.

The FPCCI report points out that the recent introduction of a filer/non-filer system, intended to incentivize filing income tax returns, has failed to achieve its objective of expanding the tax base. Over one million non-filers have been identified, and including unregistered individuals, the FBR has the potential to bring nearly 2 million new taxpayers into the tax net by June 2024.

Pakistan’s tax collection system pales in comparison to neighboring India. The FPCCI report highlights a significantly narrower tax base in Pakistan, with a far lower proportion of individuals contributing to total income tax and a substantially lower number of return filers.

Adding another layer to the challenge, out of the 3.6 million registered individuals who filed tax returns, a concerning number of 1.4 million declared zero income, leaving only 2.2 million who reported taxable income in their annual returns.