Islamabad: Finance Minister Muhammad Aurangzeb disclosed today that nearly half of the estimated PKR 3.4 trillion in tax evasion is attributed to large corporations, as reported on October 11.
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During a press briefing alongside Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial, Minister Aurangzeb issued a strong warning to the Chief Financial Officers (CFOs) of these companies, cautioning against filing inaccurate tax returns. He underscored that such violations could lead to severe penalties, including imprisonment for up to 10 years.
Recent enforcement actions, including the arrest of individuals associated with a major footwear company implicated in tax evasion, reflect the government’s intensified crackdown on corporate tax evasion. This enforcement effort is expected to escalate further in the coming weeks.
Aurangzeb highlighted that Pakistan’s economic stability is at risk with a tax-to-GDP ratio of 9-10%, below the optimal 13%. Correcting this imbalance, he stressed, is crucial to support sustainable economic growth.
Chairman Langrial echoed these sentiments, emphasising the FBR’s commitment to eliminating non-filers by October 14. He identified fraudulent input tax adjustments as a significant issue, urging CFOs to ensure compliance to avoid legal repercussions.
The FBR is also planning to introduce a value-added tax (VAT) system for sales tax collection, although resource constraints remain a challenge. Efforts are underway to enhance human resource capabilities and auditing procedures through specialised training programs.
According to FBR data, widespread tax fraud spans multiple sectors, including iron and steel, cement, beverages, batteries, and textiles. Companies in these sectors have been found misreporting earnings, inflating input tax claims, and issuing fraudulent invoices. The estimated total sales tax fraud in these sectors amounts to PKR 227 billion.
Specific cases include iron and steel companies evading PKR 29 billion in taxes through questionable claims on scrap metal and coal, and the battery sector evading PKR 11 billion through lead-related claims. Similar irregularities were identified in the cement, beverages, and textile industries, resulting in significant revenue losses due to fraudulent practices.
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Aurangzeb reaffirmed the government’s commitment to holding tax evaders accountable, emphasising that strict actions will be taken against all involved in such activities.