The government has warned non-filers and Chief Financial Officers (CFOs) of wealthy manufacturing firms, urging them to pay their taxes and avoid exploiting input adjustments, which are significant sources of tax fraud affecting public finances.
Finance Minister Mohammad Aurangzeb emphasized that non-filers should be concerned, as the government is determined to identify the largest tax evaders.
During a press conference at the FBR headquarters, alongside FBR Chairman Rashid Mehmood Langrial and IR Policy Member Hamid Ateeq Sarwar, Minister Aurangzeb revealed that sales tax evasion amounts to approximately Rs3,400 billion.
Chairman Rashid Mehmood warned CFOs not to endorse fraudulent sales tax returns to avoid facing criminal charges. He stated that legal actions would be taken against CFOs who approve such returns and that they must provide affidavits confirming the legitimacy of monthly sales tax filings.
Rashid Mehmood also acknowledged past shortcomings within the FBR and committed to improving the tax-to-GDP ratio, aiming to raise it to over 13%. He noted the urgency of addressing tax fraud in key sectors, as the current tax-to-GDP ratio of 9% to 10% is unsustainable without support from bilateral partners.
The Finance Minister pointed to five primary sectors—textiles, cement, beverages, iron and steel—where tax evasion is estimated at Rs 227 billion annually. The FBR has already identified this fraudulent tax amount and will initiate recovery efforts.
Only 14% of the 300,000 manufacturers registered are involved in Rs 3,400 billion in sales tax evasion. Many of those registered misreport their turnover, claim excessive input tax, or use fraudulent invoices.
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The Finance Minister highlighted findings from studies on the iron and steel, cement, beverages, batteries, and cement sectors.
