Zero revenue, millionaire life-style: Pakistan’s tax system below hearth – Enterprise

ISLAMABAD: Concerns are mounting inside the nation’s high tax equipment that Pakistan’s revenue tax system is failing to seize the true wealth of its residents, as roughly half of taxpayers proceed to declare nil incomes far under the lavish life they preserve, Dawn has realized from official sources.

As of June 30, the Federal Board of Revenue (FBR) had acquired 5.9 million revenue tax returns for the tax 12 months 2024. Notably, practically half of those filings got here from taxpayers who declared zero revenue, underscoring a persistent development of taxpayers declaring nil revenue.

This sample is constant into the present tax 12 months, with early knowledge for 2025 reflecting an identical surge in filings from people reporting no taxable earnings. “More than 40 per cent of taxpayers declared nil income in their returns filed up to Sept 27,” a tax official confirmed to Dawn on Saturday.

People reside in palatial homes, having fun with 24/7 air-con, driving fancy automobiles, sporting branded garments, making a number of worldwide journeys, shopping for branded watches/jewelry and different luxuries. Still, their revenue tax returns don’t mirror their life. The revenue declared and tax paid isn’t reflective of their residing requirements, as identified after an inside evaluation of the tax returns filed with the FBR.

Despite opulent residing, practically 50pc of return filers report zero revenue, revealing a failing system

Officials mentioned that superior tax jurisdictions have lengthy leveraged familial and group networks to uncover hidden property — rewarding whistleblowers handsomely whereas safeguarding their identities.

Pakistan’s present framework affords a most reward of Rs5m for informants, however the FBR is now pushing to lift that ceiling dramatically to Rs150m, structured on a graduated scale.

The proposal, officers mentioned, goals to incentivise credible disclosures whereas aligning Pakistan’s enforcement instruments with world finest practices. Crucially, FBR officers stress that informant confidentiality have to be enshrined in regulation, warning that any breach would represent a violation of Section 216 of the Income Tax Ordinance 2001.

According to tax officers, who spoke on situation of anonymity, the adjustments are obligatory as a result of the prevailing system has did not seize the true revenue of many taxpayers. “It is a well-known fact that some individuals are living in palatial houses, driving expensive cars, travelling abroad, and spending on luxuries, yet their declared income and taxes paid do not reflect their lifestyles,” one official famous.

They added that below the common self-assessment scheme, taxpayers’ declarations are accepted with out routine questioning, a apply that’s being misused. The success of such a system, the officers mentioned, relies on “robust deterrent audits backed by third-party data and digitised economic structures.”

However, Pakistan’s cash-driven and largely undocumented financial system continues to defend undeclared wealth from formal scrutiny. This undocumented financial system continues to frustrate efforts to broaden the tax base.

To overcome this problem, officers urged wanting past conventional knowledge sources and tapping into casual social networks to detect hidden revenue.

These embody prolonged households, in-laws, neighbours, workplace colleagues, membership members, accountants, and even low-paid staff resembling drivers and home employees.

“These people are aware of cash transactions and lifestyles. If secrecy is guaranteed and proper rewards are assured, they can become valuable sources of information,” one FBR official defined.

The officers mentioned superior tax techniques overseas already depend on whistleblowers and social networks to reveal hidden revenue. Pakistan, they mentioned, should undertake comparable strategies, however solely below a framework that evokes confidence in informants. “The two pillars of such a system are absolute secrecy and credible rewards,” one other senior officer mentioned.

They additional suggest that whistleblower rewards be simplified in keeping with worldwide finest practices, making certain each ease of claims and swift funds.

They additional famous that the present whistleblower reward system is “not fully equipped to harness this potential” and referred to as for pressing amendments. They additionally urged that data collected via whistleblowers be used just for the present tax 12 months, giving taxpayers a chance to enhance compliance with out concern of retrospective audits.

“This would send a clear message to citizens to file correct declarations, while also reassuring them that positive behaviour will be encouraged,” an official remarked.

Published in Dawn, September twenty eighth, 2025