In a significant development that could reshape Pakistan’s tax landscape, the International Monetary Fund (IMF) has set a new precondition for future tax relief—the registration of at least 50,000 traders with the FBR.
The demand, tied directly to the rollback of the controversial 4% additional sales tax on supplies to unregistered individuals, was revealed during a Senate Standing Committee on Finance meeting.
Chaired by Senator Saleem Mandviwala, the session featured detailed briefings from top officials of the Federal Board of Revenue (FBR) and the Ministry of Finance, who faced a flurry of questions from lawmakers and business leaders concerned about recent tax measures.
FBR Member Dr. Hamid Ateeq Sarwar disclosed that while 200,000 businesses are registered under the sales tax regime, only 60,000 actually pay taxes—including 30,000 manufacturers. This, he stressed, highlights serious tax compliance issues in Pakistan, especially considering the country has over five million commercial electricity connections.
To counter this, the FBR plans to tighten tax controls further. Daily digital invoice reporting will soon be mandatory, and all transactions exceeding Rs200,000 must go through banking channels. “If traders want relief from the 4% additional sales tax, they must come forward and register,” Dr. Sarwar stated.
In a shocking revelation, Dr. Sarwar also disclosed that the FBR uncovered tax frauds worth Rs2,210 billion over the past two fiscal years. These massive scams, involving fake and flying invoices, have already led to several arrests and dismissals within the FBR. "This is the highest number of terminations in the department's history," he added, affirming that accountability applies even to FBR officers.
The recently passed arrest law sparked heated debate, with members of the business community, particularly the Karachi Chamber of Commerce, voicing fears of potential misuse. The committee recommended that no one should be arrested merely on suspicion.
Dr. Sarwar tried to ease tensions, clarifying that arrests could only be made with judicial approval and concrete evidence. “Even I can be suspended if I misuse authority,” he assured. The law, he emphasised, targets only those involved in fake receipts and fraudulent invoices.
Minister of State for Finance Bilal Azhar Kayani reassured traders that no lawful taxpayer would face harassment. “The Prime Minister has made it clear—harassment will not be tolerated,” he said. He added that consultations were ongoing with trade bodies and that a clarifying circular would be issued soon to address concerns.
Despite growing pressure, the government ruled out immediate amendments to the arrest law, though Senator Mohsin Aziz and others called for future adjustments to prevent potential abuse.
