Prime Minister Shehbaz Sharif has approved new restrictions on compliant taxpayers, preventing them from purchasing assets that exceed their declared income sources. Additionally, non-filers will be barred from acquiring significant assets altogether.
During a recent meeting focused on the transformation of the Federal Board of Revenue (FBR), the Prime Minister allocated an extra Rs34 billion to modernize the agency. He ruled out the introduction of a mini-budget to address revenue shortfalls and directed FBR Chairman Rashid Langrial to improve collection efforts to cover a projected Rs200 billion deficit for the first quarter.
The Prime Minister has greenlit a five-point plan aimed at reforming the FBR, which includes obtaining necessary legal and regulatory approvals before implementation. The financial package will be used for various initiatives, including rewards for officers, purchasing scanners, and establishing 20 new checkpoints along the Indus River to combat smuggling.
Furthermore, the Prime Minister has authorized the hiring of 1,560 private consultants for audits while approving the conversion of several high-ranking FBR positions into director-general roles. A new model tax office will also be created, incentivizing officers with additional monthly salaries.
The FBR’s transformation plan focuses on enhancing digital tracking of compliant taxpayers and scrutinizing their income tax filings with the assistance of private sector experts. However, concerns were raised during the meeting that aggressive targeting of compliant taxpayers might harm overall revenue.
The FBR had previously proposed a presidential ordinance that would restrict compliant taxpayers from making asset purchases unless fully disclosed in their tax returns. The government believes many of the nearly six million registered filers are underreporting their income and assets.
Additionally, non-filers will be restricted from purchasing properties and opening bank accounts, contingent on stakeholder approval and legal amendments. The Prime Minister emphasized that non-filers should face more stringent penalties beyond higher tax rates, despite recent allowances for late filers to join the active taxpayer list upon payment of fines.
A new column will be added to income tax returns to allow filers to disclose the current value of their assets, although this may face legal challenges. The government will also prevent non-filers from investing in mutual funds or the stock market.
The transformation plan includes punitive measures against those failing to pay taxes or engaging in fraudulent activities, but these will be implemented after consulting with “good taxpayers.”
The allocation of Rs34 billion for the FBR will facilitate the acquisition of new technology and enhance the operational framework of the customs department, particularly in high-smuggling areas.
While performance rewards for officers were discussed, concerns about the lack of logistics support and career progression were raised. Customs officers will receive specialized incentives funded by a portion of confiscated goods revenue, whereas Inland Revenue Service Officers will have their bonuses tied to integrity and work quality assessments.
Finally, the Prime Minister’s Office reiterated the need for capable officers to be placed in key locations such as Karachi, which contributes significantly to tax revenue, along with hiring private consultants to audit compliant taxpayers. However, sharing taxpayer data with third-party firms may raise legal issues under current regulations.
