Freezing bank accounts, banning real estate, buying vehicles recommended for tax evaders

• FBR proposes penalty of Rs 1 crore for incomplete, incorrect tax returns.
• Recommends policy changes for incorrect tax documents.
• Third-party control, the use of artificial intelligence is proposed for increased transparency.

ISLAMABAD: As the Prime Minister Shehbaz Sharif-led government aims to address its fiscal woes, the Federal Board of Revenue (FBR) has suggested drastic measures to avoid possible tax collection shortfalls, including freezing bank accounts and imposing a market ban real estate and vehicles for tax evaders, The News reported on Thursday.

Facing a monumental tax shortfall in the first quarter (July-September) under the IMF’s $7 billion Extended Fund Facility (EFF) program coupled with its failure to bring 3.2 million retailers into the tax net, the tax collector has been prepared for major tax measures by millions.

The current government, in its tax-heavy budget passed in June, had set out an ambitious tax plan to boost its prospects of securing a new bailout deal with the IMF — which it eventually did as the program now awaits executive approval of the Fund committee.

The current government, in its tax-heavy budget passed in June, had set out an ambitious tax plan to boost its prospects of securing a new bailout deal with the IMF — which it eventually did as the program now awaits executive approval of the Fund committee.

Sources said an internal FBR assessment showed a fiscal deficit of over Rs 220 billion for the first quarter (July-September) against the agreed target of Rs 2,652 billion.

The authority faced a shortfall of Rs 98 billion in August 2024. The FBR had collected Rs 1,456 billion in the first two months (July and August) against the set target of Rs 1,554 billion leaving the body with the difficult task of getting Rs1, 196 billion. during the current month (September) to implement the first quarter target agreed with the IMF.

The FBR’s annual tax collection target was Rs 12,970 billion, which was approved by parliament (Rs 12,913 billion).

Speaking to the publication on Wednesday, official sources confirmed that the FBR has identified two million zero files out of the total of six million return filings.

Proposing to categorize non-applicants into three categories, the authority recommended the government to impose a penalty of Rs 1 million for wrong/incomplete tax returns.

The FBR official further added that ‘zero filers’ would have to face severe action, including freezing of their bank accounts and ban on buying property or vehicles with immediate effect.

Whereas, those who evade paying tax amounts ranging from Rs 0.5 million to Rs 1 million will face disconnection of electricity and gas connections.

It should be noted that the tax collector previously ordered the disconnection of 0.5 million non-archiving mobile phones but failed to achieve the desired results.

The FBR, in the third category, has come up with the recommendation that if the tax evaders were under deposits of up to Rs 1 crore or more, it would also suggest some more measures against them.

In addition, policy changes have also been proposed with a focus on those filing inaccurate tax returns, which will apply across the board, including Tier 1 retailers and manufacturers, and cover both sales tax and income tax.

In addition, it has also been proposed to involve a third party monitor for all those who submit incorrect or incomplete declarations to ensure increased transparency along with the use of artificial intelligence and immediate and comprehensive checks to aid money laundering.

However, such strict measures could only be implemented through a micro-budget with the consent of parliament, and the government would have to draft a bill to amend tax laws or issue a decree to give sweeping powers to the tax apparatus.

The IMF, in case of fiscal arrears, may request additional fiscal measures through a micro-budget.

The FBR proposals have been proposed through the mini-budget instead of further burdening the existing tax payers.