KARACHI: In a significant admission that has resonated deeply within Pakistan’s economic circles, the Federal Board of Revenue (FBR) has officially conceded that the nation’s elevated tax rates and stringent fiscal policies are directly contributing to an alarming capital flight towards Dubai.
During a candid and at times heated session of the Senate Standing Committee on Finance, senior FBR officials acknowledged a noticeable migration of Pakistani businesses, investors, and even real estate capital to the thriving commercial hub of the United Arab Emirates (UAE).
Hamid Attique Sarwar, Member Inland Revenue Operations, directly addressed the committee, chaired by Senator Saleem Mandviwalla. Responding to probing questions from concerned lawmakers, Sarwar unequivocally stated, “Yes, businesses are moving to Dubai, and yes, we are losing revenue.” The committee, mirroring widespread public sentiment, sharply criticized the FBR for imposing what they described as “suffocating tax laws” that are actively driving enterprise out of Pakistan.
Senator Farooq H. Naek further highlighted the severity of the situation, pointing out that property tax rates for non-filers currently range from a staggering five to 35 percent. He warned that a significant number of Pakistanis are reportedly stashing undeclared income abroad while comfortably owning properties in Dubai. This trend, he argued, not only illustrates the massive scale of tax evasion but also underscores the FBR’s apparent inability to effectively curb it.
Committee members issued a stark warning: if Pakistan fails to cultivate a more business-friendly environment, the exodus of capital and businesses to Dubai will only accelerate. Senator Mandviwalla passionately advocated that instead of attempting to pursue or penalize businesses that have already relocated to Dubai, the government’s focus should pivot towards making Pakistan a genuinely viable and competitive investment destination.
In its defense, the FBR reiterated that its role is primarily to implement the tax laws legislated by Parliament. Nevertheless, the department did reveal a new proposal to significantly hike penalties for tax evasion, with plans to increase the current maximum fine of Rs500,000 to a much higher, yet undisclosed, amount.
Meanwhile, the FBR affirmed that its enforcement efforts are in full swing. Daily raids are reportedly being conducted in major cities including Karachi, Lahore, and Islamabad, with an average of 20 businesses being sealed each day for various tax violations. In a notable success, the FBR reported a 34.5% increase in tax revenue from its crackdown on the sugar industry, confirming that 95% of this sector has now been integrated into real-time monitoring systems.
Despite these ongoing efforts and reported successes, the underlying issue of capital rushing to Dubai remains a significant concern. The Senate Standing Committee has now demanded a comprehensive report from the FBR, detailing all pending tax refunds and providing a broader assessment of the economic fallout resulting from this capital flight. As Pakistan grapples with these challenges, the nation stands at a critical juncture: implement significant tax reforms or risk losing more of its economic vitality to Dubai’s more welcoming fiscal landscape.
