In a bid to expand compliance with taxation laws, the Federal Board of Revenue’s (FBR) Chairman, Rashid Mahmood Langrial, vowed to launch a crackdown against non-compliant businesses. Appearing on Television, he outlined the FBR’s intent to look into existing loopholes the tobacco sector exploits, digitise the monitoring process, and commented on the new passive income tax framework.

 

Outlining the board’s achievements with the sugar industry, the chairman assured that the tobacco sector will soon fall into the tax net as well. According to details from reports, Islamabad’s crackdown against businesses in the sugar industry allowed for a staggering 39 percent boost in tax collection levels. It merits a mention that this increase in collections came about without a hike in tax rates.

 

The chairman highlighted that, similar to the sugar industry, other sectors would be at the receiving end of similar crackdowns to ensure compliance. Illicit tobacco and cigarette companies operating in the domestic market have resulted in the federal government losing out on Rs300 to Rs500 billion in unrealised revenues.

 

He outlined the federal government’s strategy of bringing businesses into the fold of compliance as opposed to raising tax rates, as higher taxes can cause the informal sector to grow stronger. The chairman revealed that the FBR has witnessed a large spike in compliance rates with tax laws in the sugar industry.

 

Moreover, he underlined accountability measures that had been put in place to reduce instances of corruption and tax evasion. The Intelligence Bureau (IB) has played an instrumental role in rooting out corrupt officials from the FBR’s staff, allowing for the tax watchdog to operate with greater efficiency.

 

Aside from the sugar and tobacco sectors, the chairman mentioned that producers in the poultry industry were engaging in large-scale tax evasion schemes. These schemes came to light after the FBR probed into the matter, and the schemes are reportedly cheating the national exchequer out of “millions of rupees”.

 

In other developments, the chairman also commented on the imposition of a new 15 percent tax on passive income, explaining how it could boost investment levels in the economy. Taxing funds parked in banks to yield interest revenues could cause individuals to pull their money out and invest in businesses or the capital market.

 

This could result in a greater level of business activity, which the FBR is expected to keep track of to bring in greater revenues.