The Federal Board of Revenue (FBR) has launched a major initiative to collect an additional Rs. 250 billion in tax revenue from retailers, aiming to address the ongoing shortfall in the country’s revenue collection. This move comes as part of a broader effort to improve tax compliance and widen the tax base in Pakistan, with a particular focus on bringing the retail sector into the formal tax net.
In collaboration with the International Monetary Fund (IMF), the FBR has devised a comprehensive strategy to generate these funds through a combination of enhanced monitoring, stricter enforcement, and the integration of advanced technology. The IMF has scrutinized the FBR’s administrative measures under its Compliance Risk Management (CRM) framework, which aims to identify and address non-compliant retailers.
One of the central elements of the plan is the expansion of the Compliance Improvement Plan (CIP) and the implementation of the Tajir Doost Scheme. This scheme, which is designed to incentivize retailers to become tax-compliant, will now be rolled out in 36 additional cities across Pakistan. The FBR’s efforts are also being supported by the integration of tax data from 145 different agencies, providing a more accurate picture of retail transactions and tax obligations.
To further enhance compliance, the FBR is implementing advanced digital tools, including digital invoicing and a track-and-trace mechanism. These technological innovations are intended to improve transparency and reduce the possibility of tax evasion. Stricter enforcement measures are also being introduced to ensure that businesses adhere to tax regulations, with plans to amend monitoring protocols across the supply chain to improve overall tax collection efficiency.
As part of its ongoing strategy, the FBR is also developing Artificial Intelligence (AI)-driven audits to streamline the tax audit process. These AI tools will enable the FBR to select 3-5 percent of the six million tax returns filed annually for further scrutiny. This targeted approach will help the FBR focus on high-risk cases while ensuring that compliant taxpayers are not unduly burdened.
To bolster the effectiveness of these audits, the FBR is also hiring independent auditors to assist in reviewing tax filings and identifying discrepancies. The IMF has been closely involved in reviewing Pakistan’s tax penalty system and is working with the government to formulate a General Anti-Avoidance Rule (GAAR). This rule is expected to enhance the FBR’s ability to tackle tax avoidance and ensure that all taxpayers pay their fair share.
The revenue generation drive is crucial for Pakistan, especially as the country faces significant fiscal challenges. The IMF’s involvement underscores the importance of these efforts, as the government works to meet the targets set in the ongoing $7 billion bailout program. Alongside these initiatives, the IMF and the government will conduct a review of Pakistan’s economic performance in the first half of FY 2024-25, assessing macroeconomic adjustments and discussing necessary reforms.
In conclusion, the FBR’s plan to raise an additional Rs. 250 billion from retailers is a critical step in addressing the country’s tax shortfall. By leveraging technology, improving compliance frameworks, and expanding enforcement mechanisms, the FBR aims to modernize Pakistan’s tax system and boost revenue collection in a more sustainable manner. If successful, this initiative could not only help Pakistan meet its fiscal targets but also improve overall tax compliance in the country’s informal retail sector.