FBR Moves to Eliminate Non-Filer Status in Crackdown on Tax Evasion

ISLAMABAD: The Federal Board of Revenue (FBR) announced on Tuesday a new set of restrictions aimed at non-filers as part of a broader initiative to enhance tax compliance and expand the tax base by eliminating the non-filer classification.

The initial set of restrictions will prevent non-filers from engaging in certain activities, including purchasing property, buying vehicles, investing in mutual funds, opening current accounts, and traveling internationally, except for religious purposes. This move signifies the government’s decision to abolish the non-filer category, meaning that individuals who previously paid a nominal fee to avoid tax obligations on these transactions will no longer have that option.

FBR Chairman Rashid Mahmood Langrial stated that there will be 15 specific activities restricted for individuals who have not filed their tax returns, with the initial focus on the aforementioned five areas. These actions are part of the FBR’s comprehensive transformation strategy, which has received approval from the Prime Minister.

An official source confirmed to *The News* that these measures will be enacted through an ordinance, with the FBR actively developing the necessary regulations and collaborating with the law ministry.

Langrial criticized the notion of classifying taxpayers as non-filers, asserting that such a distinction does not exist globally and should be eliminated. The focus will shift towards differentiating between compliant and non-compliant taxpayers.

Utilizing advanced machine learning and algorithms, the FBR plans to identify non-filers more effectively. Langrial noted that only Rs25 billion was collected from non-filers in the previous year, while the potential tax revenue from these individuals remains significantly uncollected. These new restrictions will be phased in over the coming months rather than implemented all at once.

Under the new regulations, non-filers will be prohibited from opening traditional bank accounts, except for basic accounts meant for low-income individuals. In efforts to tackle smuggling, the FBR is ramping up automation and increasing manpower at key entry points across the country.

“These initiatives aim to discourage non-filers and promote compliance among taxpayers,” Langrial explained during a consultative meeting with leading industrialists and business owners.

He also announced plans to limit the use of bank cheques, which have increasingly served as an alternative currency for various entities. In collaboration with the State Bank of Pakistan, the FBR will monitor individuals whose income levels do not correspond with their transaction volumes, enabling commercial banks to report any discrepancies. For compliant taxpayers, the FBR intends to link economic activities to banking transactions and will conduct a trial phase for these processes, allowing time for necessary adjustments.

Minister of State for Finance Ali Pervaiz Malik emphasized a shift towards a more inclusive consultation approach with stakeholders. He mentioned that the FBR is pursuing digitalization initiatives aimed at formalizing previously untaxed sectors and promoting compliance while also introducing punitive measures against tax evasion, including under-invoicing and mis-declaration.

Malik stated, “We have implemented aggressive taxation measures resulting in Rs3.5 trillion in one year,” noting that the tax-to-GDP ratio has stagnated for several years. “Our goal is to broaden the tax base and target the untaxed.” He reaffirmed the government’s commitment to tackling tax evasion and increasing the overall tax-to-GDP ratio.

Langrial also indicated that issues concerning employee collusion at ports will be addressed before December, with plans for a “replaceable system” to prevent long-term assignments in one location. He responded to concerns from industrialists regarding enforcement and documentation in the industry, expressing that existing taxpayers would face increased taxes without addressing under-reporting and non-filing issues.

During the meeting, industrialists, whom he referred to as “revenue spinners,” voiced their support for the FBR’s documentation and automation initiatives. Arif Habib, representing the industrial sector, pointed out that without taxing the agricultural sector, the tax-to-GDP ratio is unlikely to improve, highlighting problems like underutilization of industrial capacity and high rates of mis-declaration during imports.

The chairman revealed that cars crossing the Indus River would be seized from non-filers, indicating a significant policy shift. He stressed the necessity of data integration as a key component of these reforms. In response to concerns from the auto sector, one representative suggested increasing taxes on non-filers instead of imposing outright bans. However, Langrial countered that previous efforts to do so had not been successful.

A representative from Unilever praised the FBR’s initiatives and called for more action from the Intellectual Property Rights (IPR) wing. Additionally, representatives from the dairy and textile sectors expressed their readiness to collaborate with the FBR on ongoing reforms, signaling a collective move toward a more documented and compliant economy.

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