Islamabad:
The Federal Board of Return (FBR) has noted “boost” opinions to nearly 11,000 companies and individuals, advising them to repair anomalies in their latest sales tax declarations or to be ready for consequences such as penalties, freezing of bank accounts and business membership.
Opinions were issued last month in the negotiations between the business world and the government, stressing the determination of the authorities to recover sales and taxes on income from individuals and businesses.
The president of the FBR, Rashid Langrial, believes that existing taxpayers pay much less than their taxes due. He began to apply a risk management system to identify gaps in the income declarations filed by these entities and individuals in the past five years. Sources said that in the first phase, around 11,000 boost was served by corporate tax offices in Karachi, Lahore and Islamabad. The merchants of Karachi and Lahore also observed a strike last month against the government’s decision to give arrest powers to the FBR and to start half of more than 200,000 rupees in the event of cash expenditure in income tax calculations.
Once contacted, the FBR said that these “not intrusive and legally non -binding boost” advice “had been served to encourage behavioral and social changes among taxpayers.
“Please correct anomalies in your income declaration. Your failure to act will be considered a choice not to comply,” warned the FBR in its opinions to Lahore companies and individuals. The FBR has warned that not processing anomalies and producing specific yields in the future could lead to financial sanctions, the placement of FBR staff within companies for monitoring and the best judgment assessments by the tax commissioners, which can cause heavy fines.
He also informed thousands of people that their bank accounts could be frozen and commercial premises sealed for non-compliance. Taxpayers have been informed that the FBR had used the advanced data analysis to examine yields and compare it against peers and jurisdictions. The analysis was fully automated without human involvement. The FBR said that for the taxation years from 2019 to 2024, its system identified anomalies in 2024. These included unusually high sales claimed as exempt or under reduced rate categories and of low added value according to the comparison of sales to purchases.
“To avoid application measures, make sure that these anomalies do not reproduce in subsequent yields and produce correct sales tax declarations for the periods planned to come,” warned the FBR. Jawed Bilwani, president of the Karachi Chamber of Commerce and Industry (KCCI), criticized the FBR decision to serve opinions during the current talks. He said many KCCI members had received opinions without any prior awareness campaign.
Bilwani has also criticized the FBR method to compare the sales models of a store with competitors, arguing that sales and added value depend on the brand and quality and are not uniform. “A customer can buy a shoe for RS100 or RS1,000. The FBR is not allowed to treat both values in the same way,” he said.
The FBR, however, said that the boost opinions have contributed to increasing the number of yields filed in July. A final analysis will be carried out after the end of the extended deposit deadline on August 4. In another type of boost, the FBR warned that reduced rate sales were unusually high compared to domestic sales, many sales claimed as exempt or under reduced rate categories instead of taxable.
“Your tax on the production reported is much lower than expected for companies in your sector and your location,” said the opinion.
However, the business world argued that it was not justified to compare similar companies without taking into account differences in efficiency, cost and management structures. The FBR has also reported excessive reimbursement requests resulting from complaints with a high tax on inputs and an unusual number of credit and debit tickets. “Please correct anomalies in your income declaration to avoid strict measures,” said another notice. The FBR added that application measures, such as the publication of inspectors on commercial sites, especially in cement factories, have considerably improved the collections despite the low sales.
The president of the FBR also transferred more than 250 tax agents from 17th to 22nd year as part of a strategy to place only category A and B agents, such as classified by various agencies, in key stations on the ground.
