FBR Targets Tax Evasion in Retail, Real Estate, and Tobacco Sectors Amid IMF Commitments

The federal board of revenue (FBR) has once again renewed its effort to enforce crackdown on tax evasion in the country, especially in the retail, real estate businesses, and corporate premises. The FBR plans that in a bid to satisfy its assurance to the International Monetary Fund (IMF) in a stratagem of presenting high-profile tax-evading, target-choice audits, and data-based enforcement.

The Pakistani government is working harder to enhance tax compliance as indicated by the latest Extended Fund Facility (EFF) review of the IMF by:

• Identifying non-compliant entities using an efficient Customer Relationship Management (CRM) system.
• Expanding the enforcement capacities by bringing in more auditors.
• Mass notifications and nudging campaigns to encourage voluntary compliance should continue to go on.

Retail Sector: Expanding Point-of-Sale Integration:

To increase the number of players who will be compliant in terms of payment of retail taxes, FBR will increase the number of players involved in the Point-of-Sale (POS) system. This IT project is expected to reduce the problem of under-reporting as it permits to monitor transactions in real-time. As part of their anti-smuggling and revenue mobilization strategy, government will also tighten monitoring of importers and especially those with suspicious or abnormal importation pattern.

Real Estate Sector: High-Risk Audit Focus:

Underreporting is high especially in the real estate industry where people scale off the taxes; the FBR is focusing on tax audit of high value transaction and unregistered developments. This can be compared to the wider reforms which have come to formalize the industry and broaden the tax base of the country.

Alos Read: Park Zameen Town 

Tobacco Sector: Smuggling and Tax Fraud Crackdown:

To combat tax evasion in the tobacco sector, particularly the informal market, the government is establishing an effective enforcement strategy, which among other things comprises of:

• Making it compulsory to use a bonded warehouse to import such things.
• Limiting the imports to the registered tobacco and filter manufacturers alone.
• Prohibition of the import of transit to Afghanistan where there have been cases of illegal diversion.

In addition, to enhance the revenue collection and compliance, the FBR will install a track-and-trace system throughout the country that will be able to oversee production in real-time. This mechanism will be complemented with enhanced anti-smuggling patrols and the checking of checkpoints, especially in the northwestern parts where the channels of the smuggling business are wide.