Mohsin Siddiqui (Chief Reporter)
The Federal Board of Revenue (FBR) Chairman, Amjed Zubair Tiwana, declared on Friday that the new revenue measures introduced in the 2024-25 budget would remain in effect. Speaking to the National Assembly Standing Committee on Finance, Tiwana emphasized that enforcement would be the top priority for the upcoming fiscal year to meet the assigned revenue collection target.
Tiwana highlighted the critical need for ample resources and increased enforcement on untaxed sectors to achieve the tax collection target for 2024-25. He noted that the enforcement drive would be intensified during the fiscal year to tax sectors currently outside the tax net or those under-paying taxes. This move addresses the trust deficit between the government and the International Monetary Fund (IMF) regarding enforcement capabilities.
“They [IMF] argue that if the FBR has been unable to enforce tax compliance over the past 70 years, it is unlikely to do so now,” Tiwana stated. He acknowledged the burden of increased taxes on the salaried class due to IMF requirements, despite the government’s reluctance to impose sales tax on milk.
During the committee briefing, Tiwana admitted that withholding taxes are imposed to compensate for the FBR’s weak enforcement. He revealed that Pakistan has more withholding taxes compared to the rest of the world, although the number has been reduced from 58 to 31.
Addressing concerns about the real estate sector, Tiwana noted that economic slowdowns have affected not only real estate but almost all sectors, including the automobile and tobacco industries. He pointed out that the significant reform initiative to shift the FBR Tax Policy Wings from the FBR is set to be completed by March 31, 2025, a move agreed upon by all stakeholders.
In the future, audits of exporters will only be conducted with prior approval from the concerned FBR Member. Over 7,000 notices have been issued to exporters engaged in domestic sales.
Tiwana provided data on direct tax collections for 2023-24, revealing that withholding tax collections amounted to Rs2,680 billion, marking a 58.47% increase. Major sources of withholding taxes included salaries, dividends, interest, and exports, which contributed Rs1,538 billion during the fiscal year.
Committee members, including Chairman Syed Naveed Qamar, expressed serious concerns over the heavy reliance on withholding taxes. They questioned the revenue collected from the FBR’s own efforts, pointing out that inflation, autonomous growth, and additional taxation measures contributed to achieving the 2023-24 target.
Naveed Qamar highlighted that everyone in Pakistan operates as a withholding agent, as reflected by the withholding tax collection during the fiscal year. Tiwana responded that the share of withholding taxes decreased from 70% to 58% in 2023-24, with direct taxes contributing around 50%, a significant increase from the traditional less than 40%.
Tiwana also reported that the FBR collected Rs1,462 billion in advance tax from banks and companies under Section 147 of the Income Tax Ordinance, 2001, through its own efforts. He affirmed that the FBR achieved its target of Rs9,252 billion during 2023-24, collecting Rs9,311 billion, reflecting 100% target achievement.
The tax-wise breakdown revealed a growth of 36.5% in direct taxes, 19.5% in sales tax, 56.1% in Federal Excise Duty (FED), and 30% in customs duty during 2023-24. The income tax target was exceeded by 121.8%, sales tax by 85.9%, FED by 96.2%, and customs duty by 100.6%.
These developments underscore the FBR’s commitment to stringent enforcement and tax collection measures to achieve fiscal stability and meet revenue targets in the coming year.
