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Business Recorder
5 days ago
- Business
- Business Recorder
Widening the tax base
EDITORIAL: Prime Minister Shehbaz Sharif while chairing a meeting to review progress of reforms in the Federal Board of Revenue (FBR), a weekly meeting held on Mondays, reiterated a decades-long exhortation by his predecessors: 'widen the tax net and reduce the burden on the poor'. And like his predecessors his administration continues to focus on raising revenue rather than on undertaking structural changes that would render the structure fair, equitable and non-anomalous. Pakistan's tax structure to this day relies heavily on indirect taxes, whose incidence on the poor is greater than on the rich, which effectively implies that the burden on the poor continues. Direct taxes, based on the ability to pay principle, accounted for nearly 49 percent of total collections; however, this does not take account of the fact that 75 to 80 percent of these collections are withholding taxes levied in the sales tax mode, which is an indirect tax — an exercise that the Auditor General of Pakistan noted and recommended to the FBR to abandon though with no success. The Federal Finance Minister is on record as having stated that the extraordinary law enforcement powers of the FBR, approved in the Finance Bill 2025, envisage effective implementation of sales tax regimen rather than on income, and Chairman of the FBR, Rashid Mahmood Langrial, is on record as having stated that the increase in collections from sugar industry are attributable to improved enforcement. In this context, it is relevant to note that successive governments, including the incumbent, focused on increasing the number of filers through access to NADRA data; however, this led to a rise in the number of filers with little increase in revenue. At the same time the FBR continues with its long-term practice of: (i) sustaining the reliance on indirect instead of direct taxes to ensure that the relatively poorer sections of society are not paying the bulk of revenue collections. In this context, it is relevant to note that the steady rise in reliance on petroleum levy (even though it is not collected by the FBR) is budgeted to generate 1.468 trillion rupees this year, which is an indirect tax and impacts on the transport costs of the poor and vulnerable; (ii) making the tax structure non-anomalous by taxing all units operating within a sector equally irrespective of ownership; (iii) failure to rationalise digital infrastructure taxes with the intent to make them more competitive against a basket of countries and fixing the tax rates for at least 10 years and fixing future spectrum flood prices while delinking the price from the dollar as suggested by a recent Asian Development Bank report; (iv) resistance to taxing certain sectors to enable their manipulation, example being the low tax prevalent on the stock market. It is relevant to note that India on average collects more than 100 billion rupees from this source against Pakistan's less than 5 billion rupees per annum; and (v) farm income tax, tax on traders, and retailers and builders, sectors which under the ongoing IMF programme will be taxed from this year onwards; however, time will tell how successful they have been. The government would no doubt argue that the attempt to raise FBR collections through raising existing taxes or bringing more items under the sales tax net or better enforcement is to ensure that the budget deficit is sustainable yet a better option would have been to reduce its own current expenditure for the time that is required to implement these structural tax reforms. Sadly, the budget for the current year envisages a rise in all items (10 percent raise in civil administration) except subsidies (for the poor though they remain untargeted) and mark-up which is expected to decline not because government borrowing is budgeted to decline but because the cost of borrowing, dependent on the discount rate, is projected to decline which the IMF, as per its reports on its website, does not appear to regard as a done deal. To conclude, structural reforms to amend the existing tax structure are the way forward rather than the measures currently in focus to increase revenue. Copyright Business Recorder, 2025
Business Recorder
17-07-2025
- Business
- Business Recorder
Pakistan-IMF talks on tax-free sugar import underway
ISLAMABAD: Finance Secretary Imdadullah Bosal said on Wednesday that negotiations are underway between the government and the International Monetary Fund (IMF) on the issue of exemption of duties and taxes on the import of sugar. During the meeting of the National Assembly Standing Committee on Finance held on Wednesday, the Ministry of Finance secretary stated that one of the structural benchmark agreed between the fund and the government is not to grant tax exemptions/amnesty schemes. 'We are in consultation with the IMF regarding tax exemption on sugar,' he added. TCP cuts volume sought in sugar tender to 50,000MT The committee members also raised questions that whether additional revenue measures would be taken in case of tax exemption on sugar imports. The Federal Board of Revenue (FBR) has exempted Customs duty on the import of 500,000 metric tons of sugar and also reduced sales tax rate from 18 percent to 0.25 percent and withholding tax up to 0.25 percent on the import of commodity by the Trading Corporation of Pakistan (TCP) or the private sector. The FBR has also exempted three percent minimum value-added tax (VAT) on the import of sugar having quantity of 500,000 metric tons. FBR Chairman Rashid Mahmood Langrial informed the committee that the FBR has not moved any summary to the federal cabinet for exemption of duties and taxes on the import of sugar. The federal cabinet has taken the decision on a summary moved by the Ministry of National Food Security and Research (MNFSR). The FBR has issued the exemption notifications after receiving decision of the Federal Cabinet, Langrial stated. The FBR chairman stated that there are 54 percent taxes imposed on sugar including 20 percent import duty. There should not be such a high import tariff on the commodity. The prices of sugar at one time came down to Rs 130 per kg, he said. The Chairman of the Finance Committee, Naveed Qamar, was of the view that there is no shortage of sugar in the country. There are sufficient stocks of the commodity in the country. It is not clear what would be the rationale behind the import of sugar in the presence of ample stocks. The government should only be worried about the price of wheat which is de-regulated, but sugar is regulated in the country. Copyright Business Recorder, 2025
Business Recorder
16-07-2025
- Business
- Business Recorder
IMF-govt talks on tax-free sugar import underway
ISLAMABAD: Finance Secretary Imdadullah Bosal said on Wednesday that negotiations are underway between the government and the International Monetary Fund (IMF) on the issue of exemption of duties and taxes on the import of sugar. During the meeting of the National Assembly Standing Committee on Finance held on Wednesday, the Ministry of Finance secretary stated that one of the structural benchmark agreed between the fund and the government is not to grant tax exemptions/amnesty schemes. 'We are in consultation with the IMF regarding tax exemption on sugar,' he added. TCP cuts volume sought in sugar tender to 50,000MT The committee members also raised questions that whether additional revenue measures would be taken in case of tax exemption on sugar imports. The Federal Board of Revenue (FBR) has exempted Customs duty on the import of 500,000 metric tons of sugar and also reduced sales tax rate from 18 percent to 0.25 percent and withholding tax up to 0.25 percent on the import of commodity by the Trading Corporation of Pakistan (TCP) or the private sector. The FBR has also exempted three percent minimum value-added tax (VAT) on the import of sugar having quantity of 500,000 metric tons. FBR Chairman Rashid Mahmood Langrial informed the committee that the FBR has not moved any summary to the federal cabinet for exemption of duties and taxes on the import of sugar. The federal cabinet has taken the decision on a summary moved by the Ministry of National Food Security and Research (MNFSR). The FBR has issued the exemption notifications after receiving decision of the Federal Cabinet, Langrial stated. The FBR chairman stated that there are 54 percent taxes imposed on sugar including 20 percent import duty. There should not be such a high import tariff on the commodity. The prices of sugar at one time came down to Rs 130 per kg, he said. The Chairman of the Finance Committee, Naveed Qamar, was of the view that there is no shortage of sugar in the country. There are sufficient stocks of the commodity in the country. It is not clear what would be the rationale behind the import of sugar in the presence of ample stocks. The government should only be worried about the price of wheat which is de-regulated, but sugar is regulated in the country. Copyright Business Recorder, 2025
Business Recorder
16-07-2025
- Business
- Business Recorder
No political victimisation through FBR
EDITORIAL: That the Federal Board of Revenue (FBR) is no longer known for being a political Hit Man is something of a relief in a country where the line between accountability and political witch-hunts has long been erased. Unlike NAB (National Accountability Bureau) — which many believe was tailor-made to serve exactly that purpose — the FBR has, to the credit of the present government, largely stayed out of headlines accusing it of partisan targeting. Chairman Rashid Mahmood Langrial's categorical statement before the Senate Standing Committee on Finance that there is 'no political victimisation' and 'no pressure from high-ups' is therefore welcome. But it does not put the matter to rest. Complaints have now surfaced — and not from fringe quarters but from inside the Senate. Senator Afnanullah Khan has alleged that a notice was issued to an IT company registered under his name for a project that never materialised due to the Covid pandemic. He claims the case, spearheaded by an official from the Corporate Tax Office in Islamabad, was deliberately fabricated. Another senator, Mohsin Aziz, pointed out that it has become common practice for cases to be reopened against taxpayers without sufficient cause. These are serious allegations. And while Langrial has promised action, including prosecution, if wrongdoing is proven, it is important that such probes are not allowed to fade away quietly. If a tax official has indeed filed a wrongful case for ulterior motives, then it is not just a matter of abuse of power — it is sabotage of public trust in the tax system. And a country that already struggles with chronically low tax compliance simply cannot afford to further erode confidence in the FBR's impartiality. That concern is even more pertinent when viewed in light of the FBR's well-documented institutional weaknesses. The Board remains woefully inefficient at performing its core function — broadening the tax net and enforcing equitable compliance. It continues to lean heavily on a narrow base of registered filers while leaving vast sections of the economy, including large segments of the elite, untouched. Add political harassment to this mix, and the FBR risks going the way of NAB — feared, loathed, and eventually dysfunctional. Langrial's efforts to clean house, such as warning officers against lobbying for postings and issuing notices against undue influence in administrative matters, deserve credit. But the test lies in follow-through. If the FBR is to avoid becoming another instrument of political engineering, it must demonstrate — quickly and clearly — that internal complaints are handled with transparency and resolve. There is also an urgent need to institutionalise whistleblower protections and accountability mechanisms within the revenue service. There is no question that the state needs a strong, independent, and capable tax authority. But independence cuts both ways. It protects against political meddling, but it also demands internal discipline. The moment tax notices start being seen as weapons to settle scores or pressure adversaries, the institution begins to lose legitimacy. For an economy as fragile and indebted as Pakistan's, the damage from such erosion could be long-lasting. The government would do well not to tempt fate by ignoring the red flags. The moment a tax official steps out of line, the response must be swift and public. Because once the perception sets in that the tax authority is being used for harassment — even occasionally — it becomes very hard to undo. Copyright Business Recorder, 2025
Business Recorder
10-07-2025
- Business
- Business Recorder
FBR chief rules out withdrawal of law disallowing 50pc cash sales expenses
ISLAMABAD: Chairman Federal Board of Revenue (FBR) Rashid Mahmood Langrial categorically stated that the government will not withdraw the new legislation, disallowing 50% of expenditure attributable to cash sales exceeding Rs 200,000 per transaction. FBR Chairman informed the Senate Standing Committee on Finance that the law has been approved by the National Assembly Standing Committee on Finance and could only be changed in the next Finance Bill (2026-27). 'We have understanding that the law has also been cleared by the Senate Standing Committee on Finance. The legislators have approved the law and not the FBR', Langrial clarified. Senate committee members were surprised to hear that the Senate Finance Committee has cleared the said law. Senator Mohsin Aziz pointed out that it is a anti-business law and you can ask any businessman about the negative implications of this law. Businesses struggle with new tax rule on high-value cash sales FBR Chairman responded that we are moving towards cashless economy. If a person is engaged in sales, it should not be done in cash beyond a certain limit. Senator Sherry Rehman stated that the PPP is against this law which is a draconian law. This new provision introduced through Finance Act 2025 has been implemented from July 1, 2025. The disallowance introduced via Section 24 of the Income Tax Ordinance, 2001 pertains exclusively to the head 'Income from Business', as defined under Section 18. Copyright Business Recorder, 2025
