ISLAMABAD: The Federal Board of Revenue (FBR) is significantly stepping up its efforts to identify and curb tax evasion across high-risk sectors, including retail, real estate, and corporate. This comes as part of the government’s ongoing commitment to the International Monetary Fund (IMF) under the Extended Fund Facility (EFF) arrangement, aiming to enhance tax compliance and boost revenue mobilization.
According to recent reports following the IMF’s review, the FBR is leveraging its revamped Compliance Risk Management (CRM) system to pinpoint taxpayers with a higher likelihood of non-compliance in these critical sectors. This data-driven approach is a cornerstone of the strategy to improve enforcement effectiveness.
Bolstering audit capacity & targeted enforcement
A key element of the FBR’s plan is to increase the number of auditors. This expansion in personnel is intended to strengthen the FBR’s capacity to conduct thorough audits and investigations, thereby reducing tax evasion more effectively. Alongside increased audits, the FBR will continue to employ targeted mass nudging and notification strategies to encourage voluntary compliance among taxpayers.
Efforts to broaden the tax base include the continued expansion of the integrated Point-of-Sale (POS) system among retailers. This initiative aims to bring more retail transactions into the formal tax system, ensuring that sales are accurately recorded and taxed.
Furthermore, the FBR is enhancing its monitoring of import declarations. Special attention is being given to importers exhibiting irregular patterns in their declarations to identify potential under-invoicing or misclassification of goods. These efforts are coupled with sustained anti-smuggling initiatives to protect domestic revenue and ensure fair trade practices.
Tackling evasion in the informal tobacco market
Combating tax evasion in the informal tobacco market remains a priority. The government has outlined specific measures to address this challenge, including conducting thorough audits of acetate tow imports suspected of being misclassified under incorrect HS codes.
To better regulate the import and use of acetate tow, a key component in cigarette filters, the FBR is mandating the utilization of bonded warehouses for these imports. Additionally, restrictions will be placed on acetate tow imports, limiting them to only registered tobacco and filter-producing companies. The transit import of acetate tow to Afghanistan will also be prohibited to prevent its potential diversion into the informal domestic market.
Enhancing Track and Trace system & border control
To further improve revenue administration and the efficiency of the track-and-trace system, the FBR is committed to its continued implementation. This system is crucial for monitoring the production and movement of goods, particularly in sectors prone to evasion.
Reinforced anti-smuggling campaigns and enhanced checkpoint operations, especially in the northwestern regions of the country, are also being undertaken. These measures are designed to intercept illicit goods and prevent them from entering the formal market, thus safeguarding legitimate businesses and government revenue.
These concerted efforts by the FBR, aligned with the commitments made to the IMF, underscore a determined push to create a more compliant tax culture and enhance the country’s revenue collection capabilities.
