Pakistan Government Targets Rs450 Billion in Tax Collections Through Digital Enforcement Measures

The Government of Pakistan has initiated an aggressive plan to collect Rs450 billion in taxes through digital enforcement measures to meet this fiscal year’s ambitious Rs12.97 trillion tax target. This plan comes in response to challenges faced in tax collection, including a shortfall in the first quarter and concerns about a weak global economy.

The Federal Board of Revenue (FBR) intends to digitally capture Rs48 trillion in services sector supplies over the next three months, with Prime Minister Shehbaz Sharif endorsing the strategy. Expanding the Point of Sale (POS) initiative to cover a broader range of sectors is central to this effort, along with targeting both compliant taxpayers and non-filers.

Key Enforcement Measures

The FBR’s plan to collect Rs450 billion includes:

• Rs50 billion from traders.
• Rs30 billion through upward revision of property valuations.
• Digital tracking of Rs47.5 trillion in sales across 10 major sectors, including wholesale, retail, transport, financial services, real estate, construction, and health.

The wholesale and retail sector alone accounts for Rs20 trillion of these sales. The POS initiative, aimed at capturing more sales data, has been in place for years, but is now being scaled to significantly increase compliance.

Focus on High-Income Earners and Large Turnovers

In addition to the POS strategy, the government will target Pakistan’s wealthiest workforce. It aims to collect an additional Rs1.2 trillion from the top 5% of the population, focusing on individuals with annual incomes exceeding Rs10 million. Other measures include:

• Restrictions on withdrawals over Rs30 million for compliant taxpayers.
• Tracking and freezing of bank accounts for unregistered manufacturers and wholesalers with turnovers over Rs250 million.

The FBR will also appoint receivers to confiscate assets of unregistered manufacturers and wholesalers who fail to comply.

Challenges and Economic Pressures

The government is under pressure to meet its agreement with the International Monetary Fund (IMF), which requires achieving the Rs12.97 trillion target as part of a $7 billion loan package. With only Rs500 billion collected so far this quarter, far short of the required Rs1.2 trillion, the government needs to ramp up its efforts.

Inflation and GDP growth are crucial to this plan’s success, with the FBR estimating that autonomous growth could bring in Rs1.9 trillion if 3% GDP growth and 12.9% inflation are achieved. However, if inflation falls below expectations or imports remain low, enforcement measures will need to cover the shortfall.