The National Assembly Standing Committee on Finance, chaired by Syed Naveed Qamar, held a session on Thursday to evaluate the Federal Board of Revenue’s (FBR) proposed enforcement measures aimed at enhancing tax compliance, especially from unregistered businesses.
The committee directed the FBR to introduce appropriate safeguards before freezing or closing bank accounts of non-registered businesses, amid mounting concerns over widespread tax evasion and underreporting. Among the proposals reviewed were the disconnection of utilities and temporary deactivation of bank accounts for non-filers.
FBR Chairman Rashid Mahmood Langrial briefed the committee, stating that under sales tax regulations, unregistered businesses would not be permitted to operate bank accounts. However, he assured that a prior notice would be issued before any account closure and that such accounts would be reactivated within two days of registration.
Langrial revealed a staggering gap in registration: out of 300,000 industrial units in Pakistan, only 30,000 to 35,000 are currently registered. He acknowledged that Pakistan’s high tax rates discourage compliance, noting that a third of manufacturers are not even in the sales tax net. “Even those within the net often fail to file returns, and many underreport their incomes,” he added. He also highlighted that electricity theft alone results in annual losses of Rs500–600 billion.
In response to queries on identifying non-compliant businesses, Langrial said the FBR would use income declared for income tax to estimate business activity and determine whether registration for sales tax is required.
While committee member Javed Hanif expressed support for the FBR’s proposals, Chairman Qamar urged caution, warning against laws that could inadvertently penalize compliant businesses. Sharmila Farooqi recommended focusing on incentives rather than penalties, suggesting a reduction in tax rates to encourage broader registration and compliance.
Finance Minister Muhammad Aurangzeb responded that while the tax regime would be improved, the government would not offer further exemptions or amnesty schemes. “The era of tax amnesties is over. Now, we must bring more people into the tax net,” he stated.
Langrial requested authorization for the FBR to deactivate bank accounts of unregistered businesses temporarily, but the committee insisted that necessary safeguards be built into the process.
Petroleum Levies and Carbon Tax Discussed
The committee also approved a proposal to raise the petroleum development levy (PDL) to Rs90 per litre and introduce a carbon levy on petrol, diesel, and furnace oil. Finance Ministry officials projected Rs100 billion in revenue from the PDL on furnace oil alone, which is imported in volumes of 1.2 million tons for 1,000MW Independent Power Producers (IPPs). The overall PDL target for FY2025–26 is Rs1,468 billion.
Additionally, the carbon levy is expected to bring in Rs45 billion. In response to a question from the committee chair about converting the levy into a carbon tax, officials estimated that such a shift would yield about Rs18 billion in federal revenue, noting that levy collections go exclusively to the Centre, while tax revenues are shared with provinces.
The Ministry of Industries shared that Rs10 billion from the carbon levy would be allocated to promoting electric vehicles (EVs), with a national target to shift 30% of vehicles to electric by 2030. Officials stated that current vehicle production is approximately 150,000 units annually, with 76,000 EVs already on the road. Production of EVs is projected to reach 2.2 million units within the next five years.
Despite the approvals and discussions, the committee emphasized that no final decisions were being made regarding the imposition of taxes or levies on petroleum products at this stage.
