By In a significant step toward curbing the cash economy, the government has agreed in principle to abolish the non-filer category, requiring all individuals to route transactions through banking channels. This reform aims to clamp down on cash flows and improve tax collection.
FBR Chairman Rashid Mahmood Langrial announced the decision during a Tuesday consultative meeting with key industry representatives. He emphasized that non-filing is a fraudulent practice that has taken root domestically and must be eliminated. He added that the FBR plans to gather additional data on individuals’ financial transactions to ensure transparency.
Property transactions at the registrar’s office will be categorized into two groups: eligible and ineligible, based on compliance. The FBR’s new measures will target non-filers by linking access to facilities like investments and bank accounts to tax compliance. Individuals will be required to route all transactions through banks to enhance traceability and eliminate cash-based exchanges.
During the briefing, Langrial warned that the issue of non-filing or nil-filing must be resolved, or the government will struggle to collect taxes, even with new measures in place. He pointed out that high tax rates discourage businesses from staying in Pakistan, especially in industries like textiles, and drive highly skilled professionals out of the country due to elevated rates for the salaried class.
Industry leaders like Khurram Mukhtar of the Pakistan Textile Exporters Association called for a comprehensive mapping of the country’s manufacturing landscape to collect accurate data on sectoral capacities and tax potential. He highlighted the need to differentiate between compliant and non-compliant taxpayers, with compliant businesses benefiting from reduced rates and other incentives.
The FBR will implement disincentives for non-compliant taxpayers, including stricter regulations on registration and transaction reporting. A cap will be introduced on cash cheque issuance, with banks required to report transactions exceeding an individual’s declared income. This system is expected to launch within a few months.
In 2023, non-filers contributed Rs20 billion in taxes, while Rs423 billion in unclaimed withholding taxes remained unaccounted for. The FBR aims to trace and close these gaps through its reforms.
During the meeting, Ziad Bashir of Gul Ahmed urged the FBR to properly educate the public on the new measures, warning against hasty implementation. He stressed the need for effective communication with citizens to ensure a smooth transition.
The meeting also discussed the potential tax gap across 20 sectors, with the textile sector showing the largest gap at Rs700 billion, followed by Rs100 billion in the cement sector. However, industry representatives disputed some of the FBR’s calculations.
Sheikh Waqar Ahmed of Nestle Pakistan advised the FBR to focus on the proper implementation of existing legislation, with many business leaders attributing the success of the reform plan to the government’s political will to reduce the cash economy and address the tax gap.
