“The number of active taxpayers during FY 2023-24 highlights a total of 4.74 million active income tax filers and 234,193 sales tax filers across various regions”—Annual Performance Report (2023-24), Federal Board of Revenue
“Direct Taxes represent the primary revenue stream for the Federal Board of Revenue (FBR), accounting for approximately 48.7% of the total tax collected in FY2023-24. The net collection amounted to Rs. 4,531 billion, marking a significant increase of 38.5% from the previous fiscal year's collection of Rs. 3,271 billion”—Revenue Division 2024 Year Book, Federal Board of Revenue.
Two recent reports (cited above) issued by the Federal Board of Revenue (FBR), the apex revenue authority at the federal level, have again proved beyond any doubt that this body is an epitome of incompetence, inefficiency, ineffectiveness, corruption, indiscipline, and data manipulation. The latest data confirm that FBR has failed on all fronts: collection targets, issuance of due refunds, widening of the tax base, countering tax evasion and avoidance, recovery of arrears, voluntary compliance, reform process, and whatnot!
It is an incontrovertible fact that FBR ruthlessly wasted borrowed funds of millions of dollars under the Tax Administrative Reforms Programme (TARP) and Pakistan Raise Revenue (PRR) Project, but could not induce/compel 20 million potential income taxpayers to file declarations voluntarily. In its Annual Performance Report (2023-24), FBR has claimed to have a total tax population of 13,446,015 as of June 30, 2024, whereas active taxpayers during the fiscal year 2023-24 were only 4,738,595! Even as of January 10, 2025, the total number of active income taxpayers is less than 6 million. The gap of non-filers, as per our own FBR data, is over 7 million!!
It may be recalled that a few months back (October 16, 2024) Rashid Mahmood Langrial, the incumbent Chairman of FBR, having no experience in tax administration and policy, claimed that the total registered taxpayers in Pakistan were only four million! He has written (most probably just signed/approved the draft made with a few changes, presented to him) the introduction of the Annual Performance Report (2023-24) wherein it is claimed that the total number of registered income taxpayers as of June 30, 2024, across Pakistan, reached 13.466 million with 3,574,269 new taxpayers added during the year [Table 6 of Annual Performance Report (2023-24)].
One wonders how the Chairman FBR missed such huge numbers in his address before the Federation of Pakistan Chambers of Commerce & Industry (FPCCI) in Karachi on October 16, 2024! Strangely, while giving a briefing before the Standing Committee of the Senate on December 26, 2024, he once again claimed that only 5-10% of Pakistanis would be affected by The Tax Laws (Amendment) Bill, 2024, presented in the National Assembly on December 18, 2024, which entails many unconstitutional provisions.
FBR has not only failed to tap the actual tax potential of Rs. 34 trillion (17% of GDP, if the informal economy is also included) but is also guilty of shifting the tax burden from the rich onto the poorer segments of society
Unfortunately, in his various addresses, Chairman FBR alleged that “90% of Pakistan’s population does not pay taxes”. This statement is contrary to facts highlighted in these columns frequently and is now refuted in two recent FBR’s official publications, namely, Annual Performance Report (2023-24) and Revenue Division 2024 Year Book.
It was highlighted in a recent article:
The disclosure by the Ministry of Finance before the National Assembly of extracting trillions of rupees as advance adjustable income tax from mobile users in Pakistan during the last five years may be shocking for many. However, it has been highlighted in these columns time and again that the poorest of the poor in the Islamic (sic) the Republic of Pakistan are subjected to such terrible and oppressive extraction, while a small number of rich and mighty members of the militro-judicial-civil complex enjoy unprecedented tax exemptions, concessions, and waivers!
The Chairman FBR in his briefing before the Senate’s Standing Committee failed to emphasise that the majority of non-filers are from the higher echelons of society, including more than 50% government employees, including officers/officials of FBR, enjoying taxable income and hundreds of elected members of parliaments. FBR has not only failed to tap the actual tax potential of Rs. 34 trillion (17% of GDP, if the informal economy is also included) but is also guilty of shifting the tax burden from the rich onto the poorer segments of society. It is serving and protecting the interests of the ruling elite—indomitable militro-judicial-civil complex, corrupt politicians greedy businessmen, and tax evaders/avoiders.
Let us try to determine a rational income tax base for Pakistan once more time. According to the 2023 official census, our population was 241,499,431, which as of today through live monitoring (January 10, 2024 at 11:18 am) is 253,351,7606. The dependent population of children under the age of 15 years is around 35% while 4% of people are above 65 years. Out of the total population, 70 million are below the poverty line earning less than two dollars a day. Our employed labour force as per the Economic Survey of Pakistan 2024 is around 72 million—the majority based in rural areas [48.5%] that earned below taxable income or agricultural income falling outside the ambit of Income Tax Ordinance, 2001.
Analysing all the above figures (juxtaposed), individuals liable to income tax and eligible to file returns for the tax year 2024 could not have been more than 20 million. However, 120 million unique mobile users [total subscribers as of June 30, 2024, were 193 million] paid 15% advance/adjustable income tax, though return filers as per FBR’s performance report remained at 4.74 million (only around two million showing any taxable income!!).
It is an irrefutable fact that all adults in Pakistan having bio-metrically verified mobile connections were/are paying income tax, whether they earn taxable income or not!
According to the Pakistan Telecommunication Authority (PTA), accessed on January 10, 2025, the total cellular/broadband subscribers as of November 30, 2024, were 193 million (79.10% mobile density), 139 million mobile broadband subscribers (56.90% mobile broadband penetration), 3 million fixed telephone subscribers (1.10 fixed teledensity) and 143 million broadband subscribers (58.39% broadband penetration).
The above figures prove beyond any doubt that with effect from July 1, 2024, the entire taxable population and even those having no income or income below the taxable limit are paying advance and adjustable 15% income tax as filers, and 75% in case of those mentioned in a general order issued under section 114B of the Income Tax Ordinance, 2001, being prepaid or postpaid mobile/broadband/internet users.
It is an irrefutable fact that all adults in Pakistan having bio-metrically verified mobile connections were/are paying income tax, whether they earn taxable income or not! If all of them file returns, not less than 100 million will be entitled to refunds. However, it is also disturbing to note that until January 10, 2025, at 11:30 am, the total number of persons (natural and legal) showing any taxable income is as low as two million out of a total of 5,981,232 (4,119,786 individuals and 1,861,446 non-individuals) active income taxpayers at the website of FBR!
It is time that FBR publishes and makes available on its website, the data of income tax filers and how much tax was received in tax year 2024 along with returns from new filers. It should also explain why only 4.74 million were active taxpayers during the fiscal year 2024, whereas the total registered income tax persons, as per its annual performance report, was 13.466 million! Needless to emphasise it is FBR’s obligation under Article 19A of the Constitution, which reads: “Every citizen shall have the right to have access to information in all matters of public importance subject to regulation and reasonable restrictions imposed by law”.
The latest data published by FBR transpire that only a fraction of the entire income taxpayers’ population filed returns for the tax year 2024. FBR has admitted in the Revenue Division 2024 Year Book that millions of citizens paid advance income tax of Rs. 2.740 trillion (60% of total income tax collection during FY 2024) under various withholding provisions (more than 65 are in operation).
It is claimed in the Annual Performance Report (2023-24) that during the fiscal year (FY) 2024, field formations succeeded in registering 4,738,595 new income taxpayers! How come out of 13,446,015 total registered income taxpayers as of June 30, 2024, only 4.74 million were on the active taxpayers’ list (ATL), and this number even on the mid-day of January 10, 2025, at the time of writing these lines, was only 5,981,232! The huge gap of 7,464,783 in income tax return filers and registered taxpayers as per FBR's data and 14 million as per potential income taxpayers requires Chairman FBR’s immediate attention as well as that of Federal Minister for Finance and Revenue and State Minister for Finance & Revenue.
The important question is what will be the position if The Tax Laws (Amendment) Bill, 2024 is passed by the National Assembly in its session starting from January 13, 2025, after being already approved by the Senate on December 29, 2024. Suppose FBR, using draconian powers, forces all mobile/broadband/internet users to file income returns, the result will be obvious: FBR will have to refund billions to those who earn no income or have income below the taxable limit.
The nation has a right under Article 19A of the Constitution to know how much tax was paid by the rich 1% of Pakistanis—judges, generals, bureaucrats, parliamentarians, politicians, professionals, industrialists, and traders, during the last 20 years
Millions of mobile users, dependent on parents, do not earn income. The overwhelming majority pay advance adjustable income tax as mobile users have income below the taxable limit of Rs. 600,000. They are not bothered to claim a refund of withheld tax by filing tax returns—primarily because filing would cost much more than the amount withheld and secondly, for a refund claim one has to file an application electronically—for many illiterate Pakistanis, imposition of such conditions by FBR shows its mind-set of highhandedness, which is highly deplorable.
On the contrary, the majority of the rich and mighty just pay a fraction of income tax by way of withholding tax on their colossal incomes/wealth. They never bother to file income returns and wealth statements. For the last six tax years 2018 and 2024 (for which notice can be issued under the limitation provided in the Income Tax Ordinance, 2001), even many FBR officers, parliamentarians, judges, and high-ranking civil-military bureaucrats and their dependents (most income-yielding assets are held in their name or benami) failed to file tax returns and wealth statements!
FBR needs soul-searching in light of the above facts and figures. It must place on its website data related to judges, generals, and high-ranking civil servants showing how much tax was paid with returns in the last ten years, along with the value of taxable perquisites and benefits in kind—claimed exempt under any specific provision of law. The nation has a right under Article 19A of the Constitution to know how much tax was paid by the rich 1% of Pakistanis—judges, generals, bureaucrats, parliamentarians, politicians, professionals, industrialists, and traders, during the last 20 years.
The data, cited above and in many other articles, confirm FBR’s ineffectiveness and incompetence. Nearly 120 million persons are paying income tax at source, but the rich and mighty are not paying taxes on their enormous incomes and assets and on the principle of ‘ability to pay’. Our tax base is distorted—the system protects tax avoiders and plunderers of national wealth besides forgoing revenues of four billion rupees through exemptions, amnesties, concessions, and immunities—most of the time using the wicked device of SROs (statutory regulatory orders).
For remedial measures, a comprehensive roadmap [Towards Broad, Flat, Low-rate and Predictable Taxes (Prime, October 2024)] exists but elected members in Parliament have no time to fix the oppressive and anti-growth tax system and give relief to the masses. Their priorities are how to protect self-interests and keep on weakening the democratic institutions by infighting at the behest of those who possess real power through the barrel of the gun and believe in subjugating their own people.