ISLAMABAD: The Federal Board of Revenue (FBR) assured the Senate Standing Committee on Finance that recent amendments to tax laws will leave 95% of households unaffected, focusing instead on curbing tax evasion. The government aims to generate an additional Rs5 trillion in revenue over the next five years through these measures.
The committee convened to discuss the Tax Laws Amendment Bill 2024, although ruling party senators were absent. Ministers Mohammad Aurangzeb and Ali Pervez Malik attended, while Senator Saleem Mandviwalla chaired the session, joined by PTI Senators Mohsin Aziz and Shibli Faraz. The meeting was adjourned for further deliberation.
FBR Chairman Rashid Mahmood Langrial highlighted that the proposed amendments prioritize resolving issues related to under-filing and non-filing of tax returns. “We are not introducing new taxes but addressing systemic inefficiencies. Ninety-five percent of households will remain unaffected by this bill,” Langrial clarified.
He noted the reforms aim to boost the tax-to-GDP ratio from the current 10.3% to 13% within five years, moving closer to the regional benchmark of 18%. Currently, gaps in tax compliance cost the economy Rs5 trillion annually, with Rs3 trillion attributed to sales tax and Rs2 trillion to income tax evasion.
Langrial revealed that only 42,000 of the 62,000 registered entities actively pay sales tax, emphasizing the need for better collection mechanisms. “Sales tax evasion is more unethical than income tax evasion,” he remarked, adding that the proposed changes would strengthen compliance and enforcement.
Senator Shibli Faraz questioned how the amendments would expand the tax base. Langrial projected significant growth in the tax-to-GDP ratio, fueled by improved revenue from sales tax, income tax, and customs duties.
Finance Minister Aurangzeb underscored the government’s commitment to restoring trust in the tax system, addressing corruption, and reducing harassment. “A credible tax authority is essential for broadening the tax base and curtailing revenue leakages,” he stated.
He expressed empathy for the salaried class, noting their disproportionate tax burden, including super tax and capital value tax (CVT). Aurangzeb stressed the need for all economic sectors, including retailers and wholesalers, to contribute fairly. “If we fail to collect from non-compliant sectors, how will we manage the next budget? Overburdening compliant taxpayers is not a sustainable solution,” he cautioned.
Discussions also touched on the bill’s classification as a money bill. Secretary of Law and Justice Raja Naeem Akbar clarified that, under Articles 73(2) and 75 of the Constitution, the bill qualifies as a money bill.
Senator Faraz emphasized that public confidence in tax authorities must be restored to achieve meaningful progress. Aurangzeb reiterated the government’s resolve to rebuild trust through its “People Process Technology” initiative and assured efforts to balance the tax burden across all socioeconomic classes.
The session concluded with a focus on aligning tax policies with fairness and efficiency, with further discussions slated for the next committee meeting.
