Meeting with the Chairman FBR

The Chairman FBR plays an important role in managing the main source of income for any state through the collection of taxes and enhancement of revenue. Pakistan previously remained in the single digits in terms of tax collection against its GDP, while developed countries in the world generally collect around 20% of their GDP through direct taxes. It is widely said that everyone in Pakistan pays taxes through the consumption of products and services. Even daily-use products, such as drinking water, are subject to various forms of taxation. I may not need to remind my viewers that for almost every utility and product we purchase, we pay taxes to the government.

But the dilemma we face is that many of these taxes are indirect taxes, even when they are included in the prices of our daily-use products. The real strength of an economy, however, is also reflected in the direct taxes collected from society. Pakistan, with a population of around 260 million people, still has a very small proportion of people who are direct taxpayers. According to the last year’s revenue data, almost 6 million people submitted their tax returns, while almost 1.5 million of them filed NIL returns, meaning no direct revenue was generated through their returns. Out of these 5.9 million active taxpayers, those belonging to the business community constitute less than 30%, creating a significant gap.

Recently, the Asaan Taxpayer Scheme introduced by the Government of Pakistan may have an impact on tax collection by facilitating the business community for transactions of up to 20 crore, with a minimum tax limit of Rs. 25,000. A green certificate or green plate will be issued to those who register themselves under the said platform. Collection of taxes is an important source for any country to run its economy, finance welfare projects, and sustain its defence budget. Pakistan’s tax collection as a percentage of GDP remains relatively low compared with many other economies in the region. The FBR, through its new tax policies, is focusing on enhancing its tax base by bringing new taxpayers into the system and integrating them into the formal tax structure.

Recently, as a Board Member of the Lahore Chamber of Commerce and Industry, we, as a team, were invited by Mr. Rashid Langrial, under the leadership of our President, Mr. Faheem Ur Rehman Saigol, to attend a session at the FBR Regional Office Lahore. It was an opportunity for me to understand the effectiveness of the system and the new policies announced by the Federal Board of Revenue, particularly how they intend to increase the overall number of taxpayers while also providing greater facilitation.

The Chairman FBR, along with his team, actively listened to and observed the problems within the system and immediately responded with appropriate directions to address issues faced by the business community. It was an important experience for me to observe government officials engaging directly with the business community and working to understand and address their concerns.

It is also the responsibility of our business community not to feel discouraged about becoming part of the tax system, but rather to participate actively in the growth and development of our economy.

By default, since the creation of Pakistan, there has often been a perception that becoming a taxpayer means facing excessive government policies and financial burdens. On the other hand, in the past, existing taxpayers were sometimes relied upon heavily to

increase revenue instead of sufficiently expanding the overall tax base. Pakistan, with tax collection of approximately 11% of its GDP, still has significant room for improvement. Globally, tax collection as a percentage of GDP in many economies reaches around 17% to 18%.We always expect the government to fulfil its responsibilities as a welfare state. Similarly, it is important to recognize the public’s basic needs. Education is a fundamental right provided by the Constitution to all citizens of Pakistan. However, according to the UNICEF report referenced in the discussion, a significant number of children in Pakistan remain out of school. In addition, our healthcare system continues to face challenges,

which can place pressure on ordinary people to seek treatment from government hospitals. These are two basic areas that, as a welfare state, should remain among the government’s key responsibilities toward ordinary citizens.

Similarly, people also want to see that the elite and ruling classes have a standard of living and public services that remain connected with the realities faced by ordinary citizens. In Pakistan, there is a significant visible gap, particularly in relation to the protocols provided to the ruling class and the bureaucracy, including large fleets of vehicles often justified on security grounds. This can create a distance between public representatives, government institutions, and the general public. The concept of public service should emphasize that those in positions of authority are accountable to and connected with the people. Building greater public confidence remains an important objective.

The conclusion of my discussion is that the government has access to useful data through passports issued to the business community. The question is whether this data is also available with NADRA and whether the government has attempted to reconcile this information. As per my understanding, a significant number of people from Pakistan have obtained passports with “business” mentioned as their occupation. It would be useful to determine how many of these individuals are already registered as taxpayers and how many have not submitted tax returns to the government.

This information could potentially help the government identify gaps in the existing tax base and facilitate the inclusion of eligible individuals into the formal tax system, while continuing efforts to expand tax collection in a broader and more sustainable manner.