FBR to block bank accounts, cut utilities for unregistered businesses

In a bid to expand the tax base, the federal government has proposed tough new measures under the Finance Bill, seeking to restrict unregistered businesses from operating bank accounts and to disconnect their electricity and gas connections, Express News reported on Thursday.

The National Assembly’s Standing Committee on Finance on Thursday granted conditional approval to the move, directing the inclusion of procedural safeguards.

During a meeting of the committee chaired by MNA Syed Naveed Qamar, Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial briefed lawmakers on the proposed amendments.

He stated that businesses not registered for sales tax would no longer be allowed to operate bank accounts. Notices would be issued prior to any such action, and accounts would be reactivated within two days of registration.

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Langrial further informed the committee that non-registered Tier-1 retailers would face disconnection of power and gas utilities while revealing that of the 300,000 industrial units operating in Pakistan, only 30,000 to 35,000 were currently registered with the FBR.

“Tax rates are admittedly high, and compliance remains low,” he said. “Electricity theft alone costs the national exchequer Rs500 to Rs600 billion annually.”

Responding to a question on how unregistered businesses would be identified, the FBR chairman said income tax filings and business volume would be used to assess eligibility for sales tax registration.

The committee was also told that a significant number of businesses, even among those registered, underreport sales and production. “One-third of manufacturers are not even registered,” Langrial said. “Those that are often engage in under-filing.”

Committee member Javed Hanif expressed support for the FBR's proposals under Sections 14A(C) and 14A(D) of the Sales Tax Act. However, Chairperson Qamar cautioned that any new law should not be applied in a manner that could unjustly penalise unintended parties.

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Finance Minister Muhammad Aurangzeb, also present at the meeting, said the government had no plans to offer further tax amnesties or exemptions. “That era is behind us,” he remarked. “Our focus is to bring more people into the tax net and to improve thresholds and procedures.”

The committee advised the FBR to include clear safeguards before proceeding with temporary account deactivations. The board was also asked to present a revised draft incorporating those protections.

Langrial acknowledged that many business models are based on tax evasion and sought permission to temporarily suspend bank accounts rather than permanently freeze them. He suggested that any decision on permanent closures should rest with a designated committee.

The proposed crackdown is part of a broader reform package aimed at increasing tax compliance in line with Pakistan’s commitments under its programme with the International Monetary Fund (IMF).