The federal budget for 2025–26 introduces a significant expansion of authority for the Federal Board of Revenue (FBR), aimed at strengthening tax enforcement and enhancing transparency in financial dealings.
One of the most notable changes is the empowerment of FBR officials with investigative authority similar to that of a Station House Officer (SHO). This new mandate allows tax officers to inspect chartered accountancy and audit firms involved in preparing income tax returns, particularly when discrepancies are suspected in a taxpayer’s financial declarations. The move is intended to ensure greater compliance and accuracy in tax reporting.
The proposed budget also includes new restrictions on the purchase of vehicles and immovable properties. Buyers will need to demonstrate that the asset’s declared value does not exceed 130% of their reported income from the previous year. Additionally, purchasers must submit a formal application to the FBR, confirming that the funds—either personally held or in the names of their spouse or children—were declared in their wealth statements.
Further enhancing its oversight, the FBR will now be authorized to share taxpayer data with commercial banks. This provision allows banks to compare declared income with financial activity, such as deposits and investments. In cases of discrepancies, banks will be required to report the information to the FBR, which may then initiate enforcement proceedings.
The FBR will also gain the authority to close bank accounts that are not properly registered. Previously limited to freezing accounts for tax recovery, the new powers will enable the agency to shut down accounts that do not comply with registration requirements. Banks will be obligated to adhere to FBR directives under this new rule.
Amendments to Section 58C of the Income Tax Ordinance further strengthen the FBR’s ability to access the offices of tax consultants and return preparers where irregularities are suspected. The intent is to examine the underlying records and justifications for financial declarations.
In addition, the legal definition of sales tax fraud is being broadened. Individuals or entities that facilitate or support fraudulent activities will now face legal prosecution.
To improve tracking of goods movement—especially high-value commodities like sugar—the FBR will also be authorized to physically monitor cargo through an upgraded tracking system, ensuring compliance with tax regulations.
E-commerce is also under greater scrutiny. The Finance Bill proposes an 18% sales tax on all online purchases. Collection agents, such as courier services and banks handling card payments, will act as withholding agents, deducting the tax at the point of delivery. This change is expected to significantly raise the cost of online shopping for consumers.
Finally, digital and social media platforms including YouTube, Facebook, TikTok, Instagram, X, and various freelancing portals will be required to submit quarterly reports of their advertising revenue to the FBR. Non-compliance could result in severe penalties, including the suspension of fund transfers via the State Bank of Pakistan.
These measures reflect a comprehensive effort by the government to modernize tax administration, enforce compliance, and adapt to the evolving digital economy.
