The International Monetary Fund (IMF) has introduced a major condition for Pakistan, requiring the registration of at least 50,000 traders before the government can consider removing the 4% additional sales tax on transactions with unregistered entities.
This condition surfaced during a Senate Standing Committee on Finance meeting, chaired by Senator Saleem Mandviwala. Senior officials from the Federal Board of Revenue (FBR) and the Ministry of Finance addressed concerns raised by the business community.
FBR Pushes for Broader Compliance
FBR Member Dr. Hamid Ateeq Sarwar highlighted that out of 200,000 registered sales tax filers, only 60,000 actually pay taxes—30,000 of whom are manufacturers. He pointed out the significant tax gap, noting Pakistan has over 380,000 industrial and five million commercial electricity users, indicating widespread non-compliance.
To address this, the FBR will mandate daily digital invoice reporting and require all sales above Rs200,000 to be made through bank channels. Dr. Sarwar stressed that further tax relief, including removal of the additional 4% tax, is contingent on trader registration.
Massive Tax Fraud Uncovered
Dr. Sarwar revealed the FBR prevented Rs2.2 trillion in tax fraud over the past two years, mostly involving fake invoices. Several culprits, including FBR personnel, have been arrested or dismissed.
Arrest Law Triggers Concern
The business community objected to the arrest powers in the new Finance Bill. In response, Dr. Sarwar clarified that arrests would only follow judicial warrants or approval from a government committee, and only with solid evidence. He reassured that protections have been built into the law to prevent abuse.
Government’s Assurance
Minister of State for Finance Bilal Azhar Kayani confirmed that lawful taxpayers would not be harassed and reiterated the prime minister’s directive to protect honest businesses. A clarifying circular is expected soon to ease trader concerns, though immediate amendments to the arrest law have been ruled out.
Senators emphasized balancing enforcement with safeguards, with a possibility of future amendments if misuse arises.
Read more: Zardari And IMF Delegation Review Economic Progress
