ISLAMABAD, June 14, 2025 – The Minister of State for Finance and Revenue and the Chairman of the Federal Board of Revenue (FBR) presented an overview of the proposed Finance Bill and a comprehensive summary of the FBR’s Transformation Plan during a high-level meeting of the National Assembly’s Finance Committee on Friday.
Massive Losses from Smuggling and Weak Enforcement
FBR Chairman revealed that Pakistan has incurred tax losses amounting to Rs500 billion due to rampant smuggling from border areas, particularly of petroleum products via the Chagai district in Balochistan. Despite persistent efforts, weak enforcement continues to cause significant revenue leakage.
He further disclosed that Pakistan’s tax-to-GDP ratio remains among the lowest in the region, standing between 10.4% to 10.5%. The FBR’s real tax growth—adjusted for inflation and GDP—was only 1% between 2016–18, and declined to -0.3% from 2018 to 2024.
Tax Gap Reaches Rs7.2 Trillion in FY 2024–25
Presenting the tax gap analysis, the FBR chairman explained that Pakistan faces an estimated tax gap of Rs7.2 trillion in FY 2024–25. This includes:
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Rs3.4 trillion in Sales Tax gap
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Rs2 trillion in Income Tax gap
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Rs0.5 trillion in Customs Duty gap
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Rs1.3 trillion in enforcement, autonomous growth, and systemic factors
Digitalization and Revenue Gains
Despite limited reforms, the FBR achieved notable success in digital enforcement. A key win was the recovery of Rs50 billion in additional revenue from the sugar industry, achieved without any change in tax rates, purely through enforcement measures.
Digital integration initiatives have led to the registration of 1,812 businesses with a combined turnover of Rs11.8 trillion. Currently, 489 companies are in the testing phase and 42 companies are already live under the digital system.
Transformation Plan and Reform Roadmap
The FBR is set to launch its Transformation Plan from December 2025, focused on automation, transparency, and improved compliance. Key components include:
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Digital Production Tracking
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Digital Invoicing
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Digital Enforcement Stations
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Cargo Tracking System
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Faceless Assessment System
A dedicated Delivery Unit has been created to coordinate these reforms and ensure timely implementation.
Concerns from the Finance Committee
Committee members voiced concerns over multiple issues:
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Increased tax on profits of small depositors – directed to be reviewed and reduced
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Gradual withdrawal of tax exemptions for FATA/PATA regions – deemed harmful for small businesses in these areas
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Faceless Assessment System – faced criticism for delays, inefficiencies, and high demurrage costs, especially in Karachi
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Digital Production Tracking errors – issues raised regarding misclassification of used/scrap vs usable materials
Chairman Syed Naveed Qamar warned that the cargo tracking and digital enforcement plans could create bottlenecks at ports. He also highlighted the underdeveloped mortgage culture in Pakistan and called for simplification of housing loan tax credits, urging the FBR to submit a threshold-based option table for consideration.
Upcoming Budget Measures Briefed
The FBR and the Minister of State briefed the committee on:
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Budgetary position and FY 2025–26 revenue targets
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Income and Sales Tax reforms
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Relief measures for salaried individuals
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Adjustments to Super Tax
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Advance tax rationalisation for services rendered to non-residents
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Reintroduction of tax credits on small housing loans
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Allowance for Sindh-based coal miners to sell beyond IPPs
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Dividend taxation on mutual funds
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Tax on e-commerce transactions
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Increased advance tax on cash withdrawals by non-filers
Parliamentarians Demand Action and Reforms
The committee strongly opposed new tax burdens on ordinary depositors and insisted on relief for small businesses, particularly in underprivileged regions. Chairman Qamar emphasized the importance of provincial cooperation in raising the national tax-to-GDP ratio.
