The Federal Board of Revenue (FBR) is reportedly considering two major initiatives to crack down on tax evasion: resuming its long-suspended Tax Directory and enlisting private-sector whistle-blowers. Under the proposed plan, private companies that provide information leading to the recovery of taxes will be rewarded with a share of the amount, ranging from 5% to 10% depending on the scale of evasion. Senior officials have stated that the wealthy elite who deliberately avoid paying taxes “will not be spared.”
The Tax Directory was last published for the tax year 2019 and was subsequently discontinued for reasons that were never officially explained. Insiders suggest that its suspension benefited individuals who could not justify their multi-million-rupee assets and incomes, which were far greater than their declared earnings.
The government is now considering publishing the Tax Directory again, with the FBR planning to send a summary to the federal cabinet for approval to resume the practice for the last fiscal year 2025. In addition, the FBR will seek permission to use private firms as whistle-blowers to gather information on potential tax dodgers. If the information is found to be accurate and leads to tax collection, the company will receive a percentage of the recovered amount. The FBR plans to grant permission to around 100 such companies.
Previously, the FBR considered allowing individuals to share secret information, but this was restricted by the higher judiciary. Now, the FBR will pit private firms against other private firms and individuals to gather information that can be used to determine taxability. Instead of hiring inspectors who can be easily influenced by the wealthy, the FBR has decided to use the digitization of the economy to cross-match declared income with actual income.
The FBR received over 7.2 million returns in the last fiscal year, but officials noted that the exercise was largely futile due to a significant increase in “nil filers.” These individuals joined the tax net merely to remain on the Active Taxpayer List (ATL) without declaring any taxable income.
