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Due to high tax rates, many businesses are reportedly shifting from Pakistan to Dubai — a concern that the Federal Board of Revenue (FBR) has confirmed.
This was revealed during a meeting of the Senate Standing Committee on Finance, chaired by Senator Saleem Mandviwalla. Members of the committee pointed out that excessive taxation is forcing businesses to relocate to Dubai. FBR officials agreed with this assessment.
The FBR explained that the tax rate on property for non-filers currently ranges between 5% and 35%. In response, the committee recommended that instead of pushing businesses abroad, the government should create a more business-friendly environment within Pakistan.
Senator Faisal Vawda proposed launching an amnesty scheme for businesses. However, the FBR rejected this idea, stating that Pakistan cannot offer amnesty schemes under the regulations of the Financial Action Task Force (FATF). The FBR is also bound by agreements with international financial institutions.
FBR officials made it clear that there will be no new amnesty schemes. They admitted that taxes are high, but emphasized that all due taxes must be collected.
The FBR shared that it is proposing to increase the maximum penalty for tax evasion starting July 2025. At present, businesses caught evading taxes face a fine of up to Rs. 500,000. Officials said that the current low penalties are affecting the effectiveness of enforcement efforts. The FBR plans to present a proposal to Parliament to increase these fines.
They also informed the committee that enforcement actions to curb tax evasion are ongoing. Every day, around 20 businesses are being sealed in Lahore, Karachi, and Islamabad. In the sugar sector alone, efforts to stop tax evasion have led to a 34.5% increase in tax collection. Around 95% of the sugar industry has now been integrated into a real-time record system.
To further strengthen tax compliance, the FBR plans to launch a media campaign. There are also proposals to offer rewards to individuals who report tax evasion.
The meeting also discussed delays in sales tax refunds. The committee chairman noted that many people have complained about not receiving their refunds. Earlier, refunds were processed within 72 hours — but now they are taking months. He questioned why exporters are facing such long delays.
In response, FBR officials said that they are focusing on five priority sectors for refunds: textiles, sports goods, carpets, leather, and surgical instruments. These sectors file their returns by the 18th of each month, and refunds are issued by the 1st of the next month. The FBR claimed that there are no pending refunds in these sectors, and that once the system is activated, refunds are directly transferred to exporters’ bank accounts. Although many export sectors had switched back to manual systems, the FBR plans to include them in the faster refund system by October.
The FBR also shared its plan to end local refunds starting next year. The goal is to prioritize exporters in refund processing. Meanwhile, daily operations continue, with 20 businesses being sealed every day in major cities for tax evasion. The FBR imposes a fine of Rs. 500,000 and seals each business for one day. There are also proposals to increase the amount of the fine and expand enforcement to smaller cities.
Additionally, the FBR is taking steps to stop the use of fake transaction receipts. A media campaign is being launched to raise awareness about this issue. The board is also considering offering rewards to those who report fake invoices. Currently, around 40,000 shops are being monitored — and the number is expected to reach 60,000 to 70,000 by the end of the year.
Due to a shortage of staff, the FBR is exploring the idea of hiring university students to monitor shops. These students would stand outside stores and check receipts from customers. In return, they would be paid a small amount for their assistance.
