FBR chief vows to eliminate corruption

Federal Board of Revenue (FBR) Chairman Rashid Mahmood Langrial has said that there will now be zero tolerance for corruption in the revenue authority.

He recalled that when someone tried to use influence for a posting or transfer, that person was suspended the same day and dismissed from service, adding that for the first time, a CSS officer was arrested on corruption charges. He proposed that tax ratios should be lower and before raising questions about misuse of taxes, "people should understand that tax collection powers rest with the federation; taxes are then transferred to provinces, which utilise them".

He stressed that improvement had begun and similar problems existed in other countries as well. Pakistan's tax rates, he added, should be lower than those in regional countries, because excessively high taxes also hindered growth. He expressed these views while speaking on the second day of the three-day Afkaar-e-Taza ThinkFest 2026 at Alhamra. Chairing a session, the FBR chairman revealed that Pakistan had 42 million households, of which only 7% had air conditioners, adding that those with higher incomes should pay more tax.

He pointed out that 325,000 people had declared that they were not liable to pay tax, while 600,000 people said tax could be imposed on them. Referring to new taxpayers, he said GDP-related indicators were being reviewed and the sales tax rate should be reduced. He criticised the mindset that "the government should work honestly and therefore I will not pay tax," calling it a strange argument. Langrial revealed that Rs472 billion in income tax did not appear anywhere in tax returns, although the FBR had records of those individuals. "People buy plots but do not declare them in their returns, which should not happen." He said different tax regimes were applied to different sectors, which was part of economic theory, and the tax rate set by the government must be enforced. In several companies, the correct application of tax rates has affected their income and profits.

The FBR chief underscored the need for increase in export earnings; otherwise, pressure would build on foreign exchange, which affects GDP growth. He added that to make local production profitable, tariffs on foreign companies should be eliminated. "How a company that produces goods locally can compete if it relies on tariff protection," he asked. Langrial noted that many people did not pay taxes. In neighbouring countries, the sales tax collection rate is 6.5%; in Pakistan it should be 5.5%, but actual collection stands at 3.1%, creating over 2% gap relative to GDP. Income tax collection is also 1% lower than it should be. He cited underreporting and tax evasion as major reasons for gaps in tax collection. In the medical sector, incorrect data is provided to the FBR and work is underway to address this. Currently, 17,000 people work at the FBR, which is a very small workforce, and no new recruitment is taking place.

He was of the view that it was not possible for those employees to audit 60,000 returns, which was why AI and modern technologies were being used. In PRAL records, 182,000 returns did not declare plots at all. He announced that several tax reforms were being introduced and would be implemented soon. Sugar mills are the most powerful group and this year Rs260 billion more revenue was collected from them through taxation measures. In the cement sector, efforts are underway to increase revenue by using AI and cameras. Attempts are also being made to collect taxes from Aptma, although various obstacles are being faced, including public campaigns by the association. By October 2024, Langrial mentioned, 4.9 million taxpayers had filed returns, while during the current fiscal year, 5.9 million tax returns were filed. He called it a success that one million taxpayers were new. Among them, 320,000 taxpayers say they cannot pay tax, while 600,000 say they are filers and can pay tax. Tax collection as a percentage of GDP has increased by one percentage point to 10.3%.

The FBR chairman noted that setting tax collection targets for the next fiscal year would be challenging, given inflation and growth rates. He agreed that salaried and corporate taxes in Pakistan were higher than in regional countries, but stressed the need to improve tax compliance rather than focusing only on whether rates were high or low.

On the occasion, former federal finance minister Miftah Ismail acknowledged that some mistakes were made during his tenure, but the current government could make improvements. He recalled that he was travelling to the US with the prime minister and would have abolished Rs6-7 billion in taxes upon return, but he was removed from office along the way. Ismail said had he been given the opportunity, he would have corrected the mistakes.