A meeting of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla, addressed pressing issues regarding sales tax refunds, with exporters facing big delays.
FBR officials informed the Senate Standing Committee on Finance that the budget will propose significantly stricter penalties for tax evasion by retailers. The fine for registered point-of-sale (POS) retailers found guilty of evasion is set to increase from Rs. 500,000 to Rs. 5 million. To encourage public participation, citizens who identify non-compliant retailers will be rewarded between Rs. 5,000 and Rs. 10,000.
FBR officials stated that there are no pending refunds in these five priority sectors, and the process is automated, with refunds directly credited to exporters’ bank accounts.
FBR officials acknowledged that all other export sectors were operating on a manual system, but assured the committee that these sectors would be brought under the “faster regime” starting from October.
Officials indicated a proposal to eliminate local refunds next year, aiming to prioritize refunds for exporters.
Crackdown on Tax Evasion and Proposed Penalties
The FBR informed the committee about their ongoing efforts to combat tax evasion, stating that approximately 20 businesses are being sealed daily in Lahore, Karachi, and Islamabad. Currently, the penalty for tax evasion is a fine of Rs. 500,000 and a one-day closure.
FBR officials announced plans to propose an increase in the penalty amount to Parliament, effective from July 2025, as the current low fines are hindering anti-tax evasion efforts. They also intend to extend the sealing and penalty measures to smaller cities.
The FBR is also taking steps against fake transaction receipts and is launching a media campaign to raise awareness. There are discussions about offering rewards to individuals who report fake receipts.
The FBR aims to expand the number of monitored shops from the current 40,000 to 60,000-70,000 this year. Due to workforce limitations, the FBR is considering engaging university students to monitor shops and verify receipts from customers leaving the premises, with some remuneration for their efforts.
Businesses Relocating to Dubai Due to High Taxes
A startling revelation during the committee meeting was the relocation of businesses from Pakistan to Dubai due to high tax rates. FBR officials confirmed this trend. They stated that property tax rates for non-filers range from 5 to 35 percent.
The Senate Finance Committee urged the FBR to provide facilities for businesses in Pakistan instead of them moving to Dubai. However, FBR officials stated that an amnesty scheme cannot be offered under FATF regulations and firmly rejected the proposal for any amnesty. They clarified that the FBR is part of international financial institutions’ loan programs and will not offer or propose any amnesty.
While acknowledging that the high imposition of taxes is a recognized fact, FBR officials asserted their duty to collect taxes that are levied.
Stay Connected with ProPakistani
Get the latest business news, market insights, and economic updates wherever you prefer.
Add ProPakistani to Preferred Sources and see more of our stories in Google Search and Top Stories.
