FBR to freeze bank accounts among new measures to clamp down on tax evaders

In a bid to plug the gap and avoid a massive tax shortfall, the Federal Board of Revenue (FBR) has proposed a slew of stringent measures against millions of tax evaders. The tax authority has identified a staggering 3.2 million retailers who have failed to comply with tax laws, including nil filers out of a total of six million return filers.

According to top official sources, the FBR has proposed categorizing non-filers into three categories and imposing penalties, including fines of up to Rs1 million for incorrect or incomplete filed returns. The authorities also plan to take drastic steps, including freezing bank accounts, banning the purchase of properties and vehicles, and disconnecting electricity and gas connections.

The proposed measures require parliamentary approval through a mini-budget or an ordinance granting sweeping powers to the tax machinery. The government will need to lay a money bill amending the tax laws or promulgate an ordinance to implement these harsh measures.

The FBR’s efforts come as part of the ongoing International Monetary Fund (IMF) programme, which aims to stabilise the country’s economy and achieve sustainable growth. The government’s failure to bring millions of retailers into the tax net has resulted in a significant revenue shortfall, necessitating drastic measures to plug the gap.

According to officials, nil filers will face immediate action, including the freezing of their bank accounts and a ban on purchasing properties or vehicles. Those who owe taxes ranging from Rs0.5 million to Rs1 million will have their electricity and gas connections disconnected.

The FBR has also proposed additional measures for individuals who owe taxes above Rs1 million. These measures aim to increase transparency and accountability, and will apply across the board, including to Tier 1 retailers and manufacturers, covering both Sales Tax and Income Tax.

To achieve this, the FBR plans to involve third-party monitoring for all individuals who submit inaccurate or incomplete returns. Additionally, artificial intelligence and immediate and complete audits will be used to identify and penalize those who evade taxes.

The FBR faced a tax shortfall of over Rs 220 billion for the first quarter (July-September) against the target of Rs 2,652 billion. The annual tax collection target of Rs12,970 billion was approved by parliament and agreed with the International Monetary Fund (IMF) for the current fiscal year.

The FBR faced a shortfall of Rs98 billion in August 2024 and had collected Rs1,456 billion in the first two months (July and August) against its target of Rs1,554 billion. To make up for this shortfall, the FBR is facing a challenging task to collect Rs1,196 billion during the ongoing month (September) to meet its target.

In case of a further tax shortfall, the IMF may request additional tax measures through a mini-budget. The proposed measures are intended to penalize those who refuse to pay taxes rather than burdening existing taxpayers further.

Web Desk Karachi