Income tax payments by the salaried class surged to approximately Rs200 billion in the first five months of the current fiscal year, marking an increase of Rs72 billion compared to the same period last year. However, the Federal Board of Revenue (FBR) has been unable to effectively utilize transaction data to ensure tax compliance from individuals not paying their fair share.
While the tax burden on salaried individuals saw a significant rise, revenue generated through taxpayer audits and the use of available data dropped by 16%, amounting to Rs26 billion during the July-November period of fiscal year 2024-25. In contrast, audits remain a complex and time-consuming process, unlike the more straightforward collection of taxes from salaried individuals or through utility bills, mobile phone connections, and banking transactions.
The FBR fell short of its five-month tax collection target by Rs341 billion, with the deficit likely to expand further by the end of December. During this period, salaried individuals contributed Rs198 billion, a 57% increase compared to the Rs126 billion collected in the same timeframe last year, according to FBR data.
The sharp rise in tax revenue from salaried individuals follows the government’s decision in June to increase their tax burden. Instead of addressing structural inefficiencies like cutting expenditures or broadening the tax base to include untaxed sectors, the focus remained on a more accessible revenue stream.
Meanwhile, audit-based tax collections declined by Rs5 billion compared to the Rs31 billion collected in the same period last year. This drop, attributed in part to legal challenges in freezing bank accounts to recover disputed taxes, underscores the inefficiencies in the audit process.
Despite the decline in audit-driven revenue, fears over the potential elimination of the non-filer category prompted many citizens to file income tax returns before the extended deadline. A total of 5.6 million tax returns were submitted, accompanied by deposits of Rs145 billion—an increase of Rs48 billion, or nearly 50%, compared to the 3.4 million returns filed in the previous fiscal year.
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