ISLAMABAD: Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial, Friday, disclosed before the National Assembly Standing Committee on Finance that the tax gap has reached Rs7.1 trillion in 2024-25 and approval of parliament is needed for enforcement measures of Rs389 billion, and help of provinces to increase tax-to-GDP ratio.
On Friday, Minister of State for Finance and Revenue and Chairman FBR presented an overview of Finance Bill proposals and a summary of the FBR Transformation Plan.
The FBR chairman disclosed that the FBR has suffered Rs0.5 trillion tax losses due to smuggling from borders, especially smuggling of petroleum products from Chagai district in Balochistan.
He informed the committee that FBR has developed an ambitious transformation plan, which will be implemented from December 2025. He said that FBR’s real tax, after adjusting for inflation and real GDP, has been one per cent from 2016-18 and -0.3 per cent from 2018–24.
He added that Pakistan faces a tax gap of Rs7.1 trillion in 2024–25 and also lags behind peers in the tax-to-GDP ratio. The FBR’s revenue as percentage of GDP stood at around 10.4 percent to 10.5 percent.
Break-up of tax gap revealed that sales tax gap stood at Rs3.4 trillion, income tax gap Rs2 trillion, customs duty gap Rs0.5 trillion, totalling to Rs5.9 trillion. After including enforcement gap, autonomous growth and other factors, total tax gap stood at Rs7.2 trillion during 2024-25, the FBR chairman said.
There is an urgent need to request provinces to help in raising tax-to-GDP ratio.
Referring to the importance of enforcement, the FBR chairman said that the FBR has collected Rs50billion extra revenue from the sugar industry during the current year despite less production. This extra Rs50 billion has been collected without any change in tax rates on sugar industry.
The digital integration exercise resulted in registration of 1,812 businesses having annual turnover of Rs11.8 trillion. A total of 489 companies are in testing phase and 42 companies are now digitally live.
During the meeting, the finance committee expressed serious concern over the increase in tax on profits. The committee chairman directed the FBR to minimise the tax on profits of small depositors. The committee opposed the gradual withdrawal of the extension to the exemption for FATA/ PATA.
Chairman Syed Naveed Qamar considered it an economic assassination of small-scale businesses in the area. He directed the FBR to reconsider the withdrawal and provide relief to the locals.
The FBR chairman updated the committee on a series of reforms, but noted a lack of enforcement. He said that a Delivery Unit has been set up to drive transformation interventions with all stakeholders. A roadmap is in place to deliver transformational impact by the end of the year.
He updated the committee on the Digital Production Tracking, Digital Invoicing, Digital Enforcement Stations, Cargo Tracking System, and Faceless Assessment System.
The Minister of State for Finance and Revenue and the Chairman FBR also briefed the committee on potential concerns and justifications. He updated the committee on the current budgetary position, revenue receipts, target for FY 2025–2026, summary of income tax measures, summary of sales tax measures, relief for salaried individuals, relief in super tax, rationalisation in rates of advance tax on rendering of services to non-residents, reintroduction of tax credit for housing loans for small residences, gradual withdrawal of extension to exemption to FATA/ PATA, allowance to coal miners in Sindh to sell to buyers other than IPPs, dividend tax on mutual funds, tax on e-commerce transactions, and an increase in advance tax on cash withdrawals by non-filers.
Some committee members raised issues with the Faceless Assessment System in Karachi, citing complaints of high charges, delays in examination and reviews, which caused significant demurrages. The members also complained about the misuse of the Digital Production Tracking and Digital Invoicing System. They stated that the Digital Production Tracking system makes errors in distinguishing between old, used, and scrap material. The FBR was; however, of the view that there are reports of usable material being misrepresented as scrap.
Chairman Qamar observed that the digital enforcement station plan may choke port points and that the cargo tracking system will create practical issues. He observed that the mortgage culture has not yet been introduced in the country. He emphasised the need for the FBR to simplify the process of tax credits for housing loans. He directed the FBR to provide a specific table of options with thresholds for the committee’s consideration.
The committee expressed serious concern over the increase in tax on profits and tax on cash withdrawals. The chairman directed the FBR to minimise the tax on profits of small depositors.
The meeting was attended by Omar Ayub Khan, Rana Iradat Sharif Khan, Syed Samiul Hassan Gilani, Ali Zahid, Zeb Jaffar, Muhammad Usman Awaisi, Dr Mirza Ikhtiar Baig, Dr Nafisa Shah, Sharmila Sahiba Faruque Hashaam, Ali Jan Mazari, Muhammad Jawed Hanif Khan, Arshad Abdullah Vohra, Muhammad Ali Sarfraz (on Zoom), Muhammad Mobeen Arif, Usama Ahmed Mela, and Shahida Begum, MNAs.
The meeting was also attended by the Minister of State for Finance and Revenue, Secretary Revenue Divisions, Special Secretary Finance and other senior officers from both the divisions.
Copyright Business Recorder, 2025
