Pakistan orders scrutiny of exporters’ tax returns after income drop

Pakistan’s Federal Board of Revenue (FBR) has ordered a detailed scrutiny of exporters’ tax returns after observing a sharp and unexplained decline in their declared taxable income following recent changes in the tax regime.

According to FBR officials, exporters have reported significantly lower taxable income after amendments to Section 154 of the Income Tax Ordinance. Under the Finance Act, export income is no longer subject to a final tax regime and has instead been brought under a minimum tax system, prompting the tax authority to initiate enhanced scrutiny.

The FBR expressed concern over an abrupt reduction in taxable income declared by large exporters and directed field formations to conduct a comprehensive review of exporters’ tax filings. Officials warned that legal action could be taken against exporters found to have reduced their income declarations without valid justification.

Major exporters based in Karachi, Lahore and Islamabad have been placed on the scrutiny list. The FBR has instructed tax offices to identify the top 30 exporters in Karachi, 20 in Lahore and 10 in Islamabad for review. Details of suspicious exporters are required to be submitted to the FBR by Jan. 1, including data shared through a Google Sheet, according to official instructions.

Meanwhile, the Pakistan Retail Business Council (PRBC) has raised serious concerns over the scrutiny drive and has written a letter to Prime Minister Shehbaz Sharif seeking immediate intervention. Copies of the letter were also sent to the finance minister, the FBR chairman and other senior officials.

In the letter, the PRBC warned that the FBR’s new directives are creating unrest in the export sector and undermining business confidence at a time when exporters are already struggling with high electricity costs and elevated interest rates.

The council said that increased scrutiny following changes in the tax system could make export activities commercially unviable and force some exporters to shut down operations. It cautioned that growing uncertainty in the export sector could negatively affect revenue targets and broader economic stability.

The PRBC urged the government to facilitate exporters rather than subject them to what it described as harassment. It called for clear policy guidelines, transparency, partnership and trust-based policymaking, warning that current measures risk unnecessary confrontation between the state and the business community.

The council emphasized that a supportive environment, rather than stringent enforcement measures, is essential for promoting exports and sustaining economic growth.