FBR briefs IMF on improving tax compliance in big cities’ markets

Pakistan's tax department on Monday briefed the International Monetary Fund (IMF) delegation about the implementation of compliance risk management measures for improving tax compliance in large markets of Karachi, Lahore, and Islamabad.

The Pakistani team, under the leadership of Chairman FBR Rashid Langrial, informed the visiting IMF delegation that the Federal Board of Revenue (FBR) has signed Memorandums of Understanding (MOUs) with 145 agencies to integrate all data.

In addition, the FBR will soon establish compliance risk management directorates for implementing the compliance risk management framework in large markets, including Islamabad, Karachi, and Lahore, using third-party data, cross-checks, and data analytics.

The tax officials also shared the Compliance Improvement Plan (CIP) with the IMF to expand the tax net, targeting professionals and small businesses.

Moreover, the team informed the visiting delegation about establishing a Tax Policy Office under the Ministry of Finance to improve tax policy analysis and allow the FBR to focus on revenue collection.

The FBR audit team also mentioned that they are adopting enforcement measures to address the current 3.5 percent of GDP compliance gap, predominantly concentrated in retail (1.1% of GDP), transport (0.7% of GDP), and real estate (0.2% of GDP).

It was informed that the compliance risk management team has identified over 50 cases, with around 3 dozen audited, resulting in projected additional revenues of at least PKR 40 billion.

Sources said that the IMF team has directed the Pakistani team to make the compliance risk management directorate functional in order to identify and audit high-risk cases.

Sources also mentioned that the IMF and FBR will continue discussions on Tuesday regarding tax policy measures for the next fiscal year, shortfall in tax revenue, and the status of agriculture income tax.