Pakistan's tax crisis deepening? Over 40% taxpayers declare nil income amid lavish lifestyles; FBR seeks to revamp steps
In Pakistan, nearly half of the 5.9 million tax returns for 2024 reported zero income, despite many taxpayers living lavishly. Over 40% of returns by Sep 27 showed no income, raising concerns about the disparity between lifestyle and reported earnings, prompting calls for tax system reforms.
Nearly half of the 5.9 million income tax returns filed in Pakistan for 2024 showed zero income, despite many taxpayers leading extravagant lives, according to Dawn. The trend seems to be continuing into 2025, with over 40 percent of returns filed by September 27 declaring no income. Its Federal Board of Revenue (FBR) sought to revamp steps.
A tax official told Dawn on Saturday, “More than 40 per cent of taxpayers declared nil income in their returns filed up to Sept 27.”
The country's top tax officials have raised concerns over the growing disparity between reported incomes and the lavish lifestyles of many citizens, underscoring how the current tax system fails to capture the country’s actual wealth, ANI reported. Officials note that many people live in grand homes, drive luxury cars, purchase branded products, and travel abroad frequently, yet their tax filings do not reflect this level of wealth.
An internal review assessment that the declared incomes are far from an accurate representation of their true earnings, the report said. Pakistan’s FBR admits that the universal self-assessment system, which accepts taxpayer declarations without regular verification, has been widely abused. Officials contend that for this system to work effectively, it requires robust audits, access to third-party data, and a digitised economic infrastructure, areas that are still insufficiently developed.
What is FBR's plan?
The FBR plans to overhaul its whistleblower programme to close these gaps. Currently, informants can receive up to ₹5 million, but the board proposes raising this limit to ₹150 million, to be awarded on a graduated scale. Officials emphasise the potential of tapping into extended families, neighbors, coworkers, and domestic staff who often have insight into undeclared assets. As reported by Dawn, advanced economies have successfully implemented similar strategies by combining strong confidentiality safeguards with generous incentives.
FBR officials are also suggesting reforms to simplify the reward system, speed up payments, and limit whistleblower investigations to the current tax year. They believe these changes would promote voluntary compliance without the fear of harsh, retroactive audits.
According to Dawn, a senior official, while emphasising the urgent need to reform Pakistan’s tax enforcement, stated, “The foundation of an effective whistleblower system rests on two elements: absolute secrecy and credible rewards."
(With inputs from ANI)