Tax tussles
THERE will be no more tax exemptions or tax amnesty schemes, declared Finance Minister Muhammad Aurangzeb on Thursday.
“We are now focused on expanding the tax net, and that process is actively underway,” he remarked while addressing concerns expressed by lawmakers, straddling the political divide, during a parliamentary panel review of proposals in the Finance Bill 2025-26.
The proposals recommend spending curbs on compliant taxpayers. They also recommend empowering the taxman to take harsh action against tax cheats and their abettors, which ranges from barring them from operating bank accounts to arresting them. The FBR has purportedly made these proposals to improve tax enforcement and compliance to boost revenue recovery. Mr Aurangzeb has already warned that the nation should be ready for additional taxes of Rs400-500bn to meet the IMF-mandated target for the next fiscal year in case parliament does not give its assent to the proposals.
Some of the new powers suggested are indeed draconian and not needed. However, the pushback from lawmakers on the proposal restricting tax filers or eligible persons from making any purchases exceeding 130pc of the assets declared in their previous wealth statement is not understandable. The call for increasing this limit to 400pc of the declared wealth amounts to a new amnesty for tax cheats.
Behind this demand appears to be the country’s powerful real estate lobby that has reaped vast profits from the previous amnesty scheme under Imran Khan’s government in 2020. After all, in Pakistan, real estate has always been the first stop for dirty money, irrespective of its source. In fact, Pakistani lawmakers should focus on building a system of checks and balances to prevent the misuse of some of the powers the FBR is seeking for enforcement, instead of pleading the tax evaders’ case.
Tax amnesty, in any form, is a bad idea as it encourages evasion and theft besides discriminating against honest taxpayers. At the same time, the minister also needs to be reminded that he needs to walk the talk on massive tax exemptions of Rs5.84tr, up by 51pc from last year’s Rs3.88tr, which the government has allowed to various sectors.
There is no doubt that exemptions to certain sectors or taxpayers are necessary for equity and growth. However, the rapid increase in tax revenues has been lost to exemptions in the last few years. This alarming situation cannot be justified on any count, especially at a time when the brunt of the revenue burden is being shifted onto compliant taxpayers such as the corporate sector and salaried individuals.
The lawmakers have this opportunity to debate the finance bill threadbare and to try and fix the broken tax system rather than advocating for new amnesties.
Published in Dawn, June 21st, 2025