Lahore, January 11, 2025: Chairman Federal Board of Revenue (FBR), Rashid Mehmood Langrial, has acknowledged that Pakistan’s tax rates are flawed and need to be corrected.
Speaking at the ThinkFest event at Alhamra Hall, Lahore, Langrial said that Pakistan is a poor country, with a majority of its population earning too little to fall under the tax net. He noted that 60% of the population has incomes so low that they are exempt from taxation.
He revealed that Pakistan faces a tax gap of PKR 2 trillion, adding that there are approximately 4 million households equipped with air conditioners, yet many of these eligible taxpayers fail to pay their due taxes.
The FBR chairman highlighted significant issues on both ends—tax collection and compliance. He remarked that the tax system is designed to serve only 5% of the population. Ironically, many of those suggesting reforms to the system are themselves not paying taxes.
Langrial stated that the government aims to collect PKR 13,500 billion in taxes this year. However, he emphasized the need to fix incorrect tax rates, especially those burdening common citizens and salaried individuals.
He clarified that Pakistan is not among the over-taxed countries and compared the country’s tax structure to India, where sales tax on goods is handled by provincial governments, unlike Pakistan, where it is federally managed.
Langrial criticized the country’s education production system, declaring it a failure. He lamented that Pakistan’s current educational status is equivalent to where France was in 1960. However, he posed the question: “Has Pakistan achieved what 1960s France did?” The answer, he said, is a resounding no, as neither adequate taxes are being collected nor sufficient public services are being provided in return.
Langrial stated that the salaried class has been unfairly included in the tax net due to the government’s inability to tax high-income individuals adequately. He added that the government recognizes that tax rates on certain items should be reduced.
He announced plans to introduce a new law to link tax compliance with purchases, making it difficult for individuals to make major transactions without filing tax returns. He pointed out that while 200,000 retailers were in the tax net last year, this number has increased to 600,000 this year. However, many retailers still fail to declare their actual income.
Langrial revealed that the federal government has decided to shut down two ministries and several departments as part of its restructuring efforts. He mentioned that the Finance Minister is meticulously working on this plan, which includes abolishing certain posts and halting future recruitment.
He also stated that while there are 700 FBR officers, many lack the necessary staff to perform their duties. Moreover, he suggested that professors’ salaries should be increased to ensure they can easily fulfill their tax obligations.
Langrial highlighted that petroleum products are among the most smuggled items in Pakistan. He assured that efforts are being made to curb all forms of smuggling.
