By Staff Reporter
ISLAMABAD: Pakistan on Thursday reported more than Rs2.2 trillion in tax evasion through fake and flying invoices over the past two fiscal years, exposing deep flaws in its tax enforcement system and a significant loss of public revenue.
The disclosure, made during a Senate committee hearing, highlights the scale of the challenge as authorities grapple with widespread tax fraud while addressing concerns from the business community over stringent tax policies.
Federal Board of Revenue (FBR) Member Hamid Atique Sarwar testified before the Senate Standing Committee on Finance and Revenue, detailing the extent of the evasion. He revealed that Rs873 billion in fake and flying invoices were detected in the last fiscal year, building on Rs1.37 trillion unearthed the previous year, for a total of Rs2.25 trillion over two years.
“This is almost one-third of the total” tax collected on the customs side, Sarwar said, emphasising the significant financial impact and responding to calls from businesses for a relaxation of tax laws under the Finance Bill 2025-26.
Sarwar stressed that such massive revenue losses could not be tolerated. “Such massive loss of revenue could not be allowed to continue,” he told the committee, adding that the FBR has taken decisive steps to curb internal abuse.
“No other department at the federal or provincial level had taken punitive action against its own workforce like FBR had,” he said, noting that tax officials found misusing their powers have faced consequences.
The testimony comes amid heated debate over the Finance Bill 2025-26, particularly provisions that grant the FBR arrest powers based on suspicion of tax evasion.
Sarwar explained that the legal framework, in place since 1996, allows an assistant commissioner to order an arrest if there is reason to believe tax evasion is occurring, records are being tampered with, or suspects are fleeing abroad.
However, he assured that the latest bill includes protections against misuse. “The latest Finance Bill provided multiple safeguards to avoid harassment of businessmen and taxpayers,” he said.
The Senate committee, chaired by Senator Saleem Mandviwalla, held an extensive discussion on anomalies in the Budget 2025–26, focusing on the arrest clauses and hearing briefings from chambers of commerce representatives. Business leaders have expressed alarm over the potential for harassment, prompting the government to outline measures to address their grievances.
State Minister for Finance and Revenue Bilal Azhar Kiyani told the committee that the prime minister has formed a dedicated committee to tackle the concerns raised by the chambers. Additionally, a review and redressal committee has been established to periodically assess business community issues.
Kiyani also announced that a circular would be issued soon to clarify gaps highlighted by the chambers, following detailed consultations with business leaders. Despite these efforts, Mandviwalla and other committee members cautioned against rushing to amend the finance bill, which was passed just a month ago with International Monetary Fund consent.
“It would not be good optics to seek amendments to the finance bill just a month after its passage,” Mandviwalla said, reflecting a consensus among members.
FBR member Dr. Najeeb provided further insight, acknowledging that the government had scaled back certain taxpayer powers in response to pushback from coalition partners, parliamentarians, and other stakeholders.
He noted significant differences between the original finance bill introduced in parliament and the version ultimately passed. “There had been a lot of difference between the finance bill originally introduced in the parliament and later passed by the parliament,” he said.
Dr. Najeeb attributed some of the lingering concerns to time constraints, explaining that extensive deliberations with the standing committees of the National Assembly and Senate left insufficient time for the usual anomaly committees to resolve all issues.
“The extensive deliberations over the finance bill with the standing committees of the National Assembly and the Senate did not leave them enough time for the usual anomaly committees to address all concerns, leaving some room for misunderstandings,” he conceded.
Still, he dismissed exaggerated fears about the FBR’s authority, insisting that “the element of fear was being unnecessarily overblown.”
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