Swift action instructed by Prime Minister Shehbaz on outstanding tax cases aimed at recovering national resources.
PM Shehbaz pushes for hard-hitting measures against tax evasion
Prime Minister Shehbaz Sharif's top priority lies in expanding Pakistan's tax net and enhancing tax collection mechanisms. This move is part of a broader reform strategy suggested by the International Monetary Fund (IMF). Here's a lowdown on the latest charges against tax evasion and revenue boosting schemes.
Expansion of the Tax Net and Sectoral Monitoring
The government's focus is on bringing tax-evading individuals and sectors into the tax system. Enhanced monitoring and enforcement is particularly aimed at key sectors including cement, sugar, tobacco, poultry, and beverages, notorious for under-invoicing and illicit trade.
Technological Advancements
Digital monitoring and track-and-trace technology deployment in major industries, especially in cement and sugar sectors, has significantly increased tax revenue. The sugar sector alone has experienced a 35% increase in tax receipts between November 2024 and April 2025. Video surveillance is also being utilized to ensure compliance in targeted industries.
Legislative and Administrative Reforms
On-going reforms include amendments to the Income Tax Ordinance and Federal Excise Act to simplify tax collection processes, make payments more convenient, and protect legitimate taxpayers' rights. Strict accountability measures have been emphasized for officials and personnel involved in enabling tax evasion.
Proposed Policy Changes
Plans are underway to increase the capital gains tax (CGT) on real estate transactions from the current 15% to as high as 35% for the 2025-26 budget. This move is designed to align real estate taxation with corporate sector rates and tap into the sector’s untapped revenue potential. Withholding taxes on raw materials could also be reviewed to reduce business costs and encourage compliance.
Revenue Targets and Oversight
The government targets achieving a tax-to-GDP ratio of 11% for the upcoming fiscal year. Real estate and digitized monitoring are identified as key areas to drive up tax collection. Powers to seize illicit products have been handed down to provincial authorities to establish effective enforcement at the grassroots level.
These measures represent a comprehensive plan to expand the tax base, utilize technology, and ensure accountability to enhance Pakistan’s tax revenue and combat tax evasion.
- The government's focus on expanding the tax net and increasing tax collection, as per Prime Minister Shehbaz Sharif's priorities, is part of a larger policy-and-legislation overhaul, which includes amendments to the Income Tax Ordinance and Federal Excise Act.
- In an effort to combat tax evasion and boost revenue growth, the government proposes to raise the capital gains tax on real estate transactions and review withholding taxes on raw materials, as part of its outlined policy changes for the 2025-26 budget.
