Business Recorder

Only 55-60pc ST taxpayers file returns

ISLAMABAD: Pakistani tax experts said that, based on the historical trend, only 55 to 60 percent of the country’s 410,000 to 430,000 sales tax-registered taxpayers file their returns. Of those who file sales tax returns, around 65 to 70 percent submit “nil” or “null” returns, leaving only 25 to 30 percent as regular taxpayers who make actual sales tax payments. Of the 3.7 million commercial and 365,000 industrial electric connections, the FBR should share the data of Sales Tax registered entities, those filing returns, those filing Nil and Null returns, and those who pay sales tax along with returns. The analysis of the data will assist in channeling its resources in the right direction. Tax experts said that recent enforcement actions by the Federal Board of Revenue (FBR)—including the sealing of retail outlets and factory raids in Karachi for alleged sales tax and POS violations—have alarmed the business community. While tax authorities justify these measures to protect government revenues, businesses argue that this strategy disproportionately penalizes the already documented economy, leaving a massive undocumented sector completely untouched. They pointed out that the FBR recently launched an incentive scheme offering retailers one percent turnover tax and temporary audit immunity to coax them into the formal sector. However, market participants warn that heavy-handed enforcement actively undermines this objective. Undocumented businesses are watching registered taxpayers endure constant inspections, penalties, and sealings. Instead of seeing the benefits of registration, they naturally question what awaits them once their temporary immunity expires, fearing that joining the tax net merely invites intense regulatory scrutiny. These figures, even before factoring in commercial gas connections, reveal a massive universe of untaxed economic activity flying completely under the FBR’s radar. The documented sector increasingly feels it is being milked beyond capacity, while non-compliant operators continue to function freely, enjoying unfair competitive advantages. Critics point to the FBR’s Broadening of Tax Base (BTB) Wing, noting a severe lack of publicly available data on its success in identifying and retaining new taxpayers. Stakeholders argue that without transparent reporting, it appears revenue collection targets are simply being met by squeezing existing taxpayers because they are easier to monitor and penalize. Tax experts warned that this approach is counterproductive. Sustainable fiscal stability cannot be achieved by continuously overburdening the same small pool of taxpayers. While a robust tax net is essential for Pakistan’s economic survival, the FBR’s current approach has created a severe trust deficit with the public and the business sector. Honest taxpayers disproportionately bear the brunt of systemic inefficiencies and aggressive tactics, such as delayed refunds, arbitrary demands, and forced advance collections to inflate revenue figures. Coupled with a lack of accountability and fair redressal mechanisms, these practices not only penalize compliant businesses but also discourage undocumented entities from registering. The FBR must pivot away from high-handed administration and focus on systemic reform to regain the confidence of both current and prospective taxpayers, they added. Copyright Business Recorder, 2026

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