Dr. Ikramul Haq
“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 federal level, have again proved beyond any doubt that this body is a 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 tax base, countering tax evasion and avoidance, recovery of arrears, voluntary compliance, reform process and what not!
It is an incontrovertible fact that FBR ruthlessly wasted borrowed funds of millions of dollars under 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 total tax population of 13,446,015 as on June 30, 2024, whereas active taxpayers during the fiscal year 2023-24 were only 4,738,595! Even as on January 10, 2025, the total number of active income taxpayers is less than 6 million. The gap of non-filers, as per own data of FBR, is over 7 million!!
It may be recalled that a few months back (October 16, 2024) Rashid Mahmood Langrial, the incumbent Chairman FBR, having no experience of 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 Annual Performance Report (2023-24) wherein it is claimed that total number of registered income taxpayers as on 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 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 that entail many unconstitutional provisions.
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 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 the 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 Islamic (sic) Republic of Pakistan are subjected to such terrible and oppressive extraction, while a small number of rich and mighty members of 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 emphasize that 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 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 ruling elite—indomitable militro-judicial-civil complex, corrupt politicians and greedy businessmen and tax evaders/avoiders.
Let us try to determine a rational income tax base of Pakistan once more time. According to 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. Dependent population of children under the age of 15 years is around 35% while 4% people are above 65 years. Out of total population, 70 million are below poverty line earning less than two dollars a day. Our employed labour force as per Economic Survey of Pakistan 2024 is around 72 million—majority based in rural areas [48.5%] that earned below taxable income or agricultural income falling outside the ambit of Income Tax Ordinance, 2001.
Analyzing all the above figures (juxtaposed), individuals liable to income tax and eligible to file returns for tax year 2024 could not have been more than 20 million. However, 120 million unique mobile users [total subscribers as on June 30, 2024 were 193 million] paid 15% advance/adjustable income tax, though return filers as per FBR’s performance report remained 4.74 million (only around two million showing any taxable income!!).
According to Pakistan Telecommunication Authority (PTA), accessed on January 10, 2025, the total cellular/broadband subscribers as on 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 taxable limit are paying advance and adjustable 15% income tax as filers, and 75% in case of those mentioned in 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, total number of persons (natural and legal) showing any taxable income is as low as two million out of total 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 own annual performance report, were 13.466 million! Needless to emphasize that 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 entire income taxpayers’ population filed returns for the tax year 2024. FBR has admitted in 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 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 that out of 13,446,015 total registered income taxpayers as on June 30, 2024, only 4.74 million were on 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 own 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 taxable limit.
Millions of mobile users, dependent on parents, do not earn income. Overwhelming majority paying advance adjustable income tax as mobile users have income below taxable limit of Rs. 600,000. They are not bothered to claim refund of withheld tax by filing tax returns—primarily because filing would cost much more than the amount withheld and secondly, for refund claim one has to file 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, 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 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 the light of 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 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 billions of rupees through exemptions, amnesties, concessions and immunities—most of the time using the wicked device of SROs (statutory regulatory orders).
For remedial measures, 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 barrel of gun and believe in subjugating their own people.
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Dr. Ikramul Haq, Advocate Supreme Court, Adjunct Faculty at Lahore University of Management Sciences (LUMS), member Advisory Board and Visiting Senior Fellow of Pakistan Institute of Development Economics (PIDE), holds LLD in tax laws. He was full-time journalist from 1979 to 1984 with Viewpoint and Dawn. He also served Civil Services of Pakistan from 1984 to 1996.