In a remarkable achievement for Pakistan’s tax administration, the Federal Board of Revenue (FBR) has reported a 53% surge in tax collection from the salaried class during the first seven months (July–January) of the fiscal year 2024-25. The collection reached Rs 284.22 billion during this period, compared to Rs 185.50 billion in the same months of the previous fiscal year. This significant growth marks a milestone in the government’s ongoing efforts to strengthen the tax system and enhance compliance across the country.
The FBR credits the surge to improved monitoring of withholding taxes and recent amendments introduced through the Finance Act, 2024. These regulatory changes have enhanced the overall compliance measures, effectively closing loopholes that previously allowed for tax evasion. With these updated regulations, the FBR has been able to collect more revenue from the salaried class, contributing significantly to the government’s financial goals.
In addition to this, the FBR has launched a comprehensive crackdown aimed at addressing discrepancies in withholding tax (WHT) deductions. According to FBR officials, an intensive investigation has uncovered issues with Rs 200 billion in misreported or fraudulent withholding tax claims. This discovery has prompted the tax authority to take swift action against entities and individuals attempting to exploit the system through inaccurate claims and tax evasion.
The investigation revealed alarming irregularities in annual income tax returns, specifically in the payment claims filed under various provisions of the Income Tax Ordinance, 2001. These discrepancies were found in the withholding tax deductions declared by employers, which did not correspond to the actual taxes paid to the government treasury. A forensic audit, paired with an analysis of tax credits against actual deposits, identified a substantial gap, particularly under the salaries category.
The most concerning finding was that Rs 147 billion worth of tax credits had been claimed by employers over the past five fiscal years, without corresponding deductions actually being made. This gap highlights the urgent need for a more robust payroll tax system and better oversight to ensure that deductions from employee salaries are accurately reported and deposited with the government.
To address these challenges, the FBR has vowed to continue its rigorous enforcement actions, intensifying efforts to recover unpaid taxes and ensure greater transparency within the tax system. By leveraging modern technology and data analytics tools, the FBR plans to proactively identify tax irregularities in real time, particularly within the salaried sector. These efforts will not only help address the existing discrepancies but also improve the overall tax compliance environment, creating a more efficient and accountable tax administration system.
Looking ahead, the FBR’s initiatives are expected to have a lasting impact on the tax landscape, especially for the salaried class. The increased transparency and improved monitoring mechanisms will support a more equitable distribution of tax responsibilities across the population, ultimately strengthening the nation’s fiscal health and ensuring a more sustainable revenue stream for Pakistan. As the FBR continues its crackdown on tax evasion, the agency’s efforts to implement advanced technology solutions will be critical in maintaining momentum and meeting its tax collection targets for the remainder of the fiscal year.