Pakistan’s top 5% wealthiest individuals evaded PKR 1.6 trillion in taxes

Tax evasion remains a significant issue for Pakistan, with the top 5% wealthiest individuals (3.3 million people) evading PKR 1.6 trillion in taxes

At a press conference on Thursday, Finance Minister Senator Muhammad Aurangzeb noted that tax return filings had increased from 3 million to 5 million by October 2024. However, 190,000 non-filers were identified, owing PKR 50 to 60 billion in taxes.

Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial and other ministers were also present.

Langrial explained that data refinement through algorithms revealed 190,000 high-standard lifestyle non-filers. “Field staff confirmed around PKR 7 billion in recoverable taxes from the top 5,000-6,000 individuals.”

He estimated a PKR 50-60 billion taxation pocket from 190,000 potential direct taxpayers.

Langrial added that the average annual income of 670,000 individuals is PKR 13.2 million, while 3.3 million others report an average annual income of PKR 4.8 million.

Aurangzeb highlighted the government's structural reforms aimed at sustainable development and growth, with taxation reforms as a priority.

“The government aims to increase the tax-to-GDP ratio to 13%, up from the current 9-10%, to strengthen fiscal stability and enhance Pakistan's image as a responsible state”.

A bill has been introduced in the National Assembly to ensure full tax compliance and address non-declaration and under-declaration issues. The government is also working on technology transformation within the FBR, introducing end-to-end digitization to ensure transparency, minimize human intervention, and eliminate corruption.

The digitization project, initiated in March 2024 under Prime Minister Muhammad Shehbaz Sharif's leadership, was approved in September and is now in the implementation stage, focusing on key economic sector integration to prevent leakages.

Langrial hinted at potential reductions in the GST rate to 10-12% in the coming years as part of the government's economic reforms to enhance revenue and tax systems.