As of June 30, the Federal Board of Revenue (FBR) had received 5.9 million income tax returns for the tax year 2024. Notably, almost half of these filings came from taxpayers who declared zero income, highlighting a persistent trend of taxpayers reporting no earnings.
This pattern is persisting into the current tax year, with early data for 2025 showing a similar spike in filings from individuals reporting no taxable income. “More than 40 per cent of taxpayers declared nil income in their returns filed up to Sept 27,” a tax official confirmed to Dawn on Saturday.
People are living in palatial houses, enjoying 24/7 air conditioning, driving fancy cars, wearing branded clothes, making multiple international trips, buying branded watches/jewellery, and other luxuries. Yet, their income tax returns do not reflect these lifestyles. An internal analysis of returns filed with the FBR pointed out that the declared income and tax paid are not reflective of their living standards.
Opulent Living vs. Zero Income: The Need for Whistleblowers
Officials noted that advanced tax jurisdictions have long leveraged familial and community networks to uncover hidden assets—rewarding whistleblowers handsomely while guaranteeing their anonymity.
Pakistan’s current framework offers a maximum reward of Rs5 million for informants, but the FBR is now lobbying to dramatically increase that ceiling to Rs150 million, structured on a graduated scale.
The proposal, officials explained, aims to incentivise credible disclosures while bringing Pakistan’s enforcement mechanisms in line with global best practices. Crucially, FBR officials stressed that informant confidentiality must be enshrined in law, warning that any breach would violate Section 216 of the Income Tax Ordinance 2001.
According to tax officials, who spoke anonymously, these changes are necessary because the existing system has failed to capture the true income of many taxpayers. “It is a well-known fact that some individuals are living in palatial houses, driving expensive cars, travelling abroad, and spending on luxuries, yet their declared income and taxes paid do not reflect their lifestyles,” one official remarked.
They added that under the universal self-assessment scheme, taxpayers’ declarations are accepted without routine questioning, a practice that is being misused. The success of such a system, the officials noted, relies on “robust deterrent audits backed by third-party data and digitised economic structures.”
However, Pakistan’s cash-driven and largely undocumented economy continues to shield undeclared wealth from formal scrutiny. This undocumented economy perpetually frustrates efforts to broaden the tax base.
To address this challenge, officials suggested looking beyond traditional data sources and tapping into informal social networks to detect hidden income.
These networks include extended families, in-laws, neighbours, office colleagues, club members, accountants, and even low-paid employees such as drivers and domestic workers.
“These people are aware of cash transactions and lifestyles. If secrecy is guaranteed and proper rewards are assured, they can become valuable sources of information,” one FBR official explained.
Officials said advanced tax systems abroad already rely on whistleblowers and social networks to expose hidden income. Pakistan, they argued, must adopt similar methods, but only under a framework that inspires confidence in informants. “The two pillars of such a system are absolute secrecy and credible rewards,” another senior officer stated.
They further proposed that whistleblower rewards be simplified in line with international best practices, ensuring both ease of claims and swift payments.
They also noted that the current whistleblower reward system is “not fully equipped to harness this potential” and called for urgent amendments. Additionally, they suggested that information gathered through whistleblowers should only be used for the current tax year, giving taxpayers an opportunity to improve compliance without fear of retrospective audits.
“This would send a clear message to citizens to file correct declarations, while also reassuring them that positive behaviour will be encouraged,” an official concluded.
