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Monday, July 14, 2025

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AGP Report 2024–25: Tax-to-GDP Ratio Falls Despite Rise in Filers

ISLAMABAD: The Auditor General of Pakistan (AGP) has revealed a concerning gap between rising taxpayer registrations and actual revenue gains, as the tax-to-GDP ratio dropped to 8.7% in 2023–24, continuing a downward trend from 10.6% in 2016–17.

According to the AGP’s latest report, despite a 76% increase in income tax return filers — from 2.959 million in 2023 to 5.215 million in 2024 — the corresponding rise in revenue was limited to just 30%. The report attributes this disparity to individuals filing returns solely to obtain procedural benefits, such as lower tax rates on property and vehicle transactions, without contributing meaningful taxes.

The audit, which assesses the Federal Board of Revenue’s (FBR) Broadening of Tax Base (BTB) Wing, highlights longstanding structural weaknesses. It also notes the underutilisation of third-party data available through FBR’s Malomaat Portal, which includes details of individuals with:

  • Industrial electricity and gas connections
  • High-end vehicles
  • Frequent foreign travel

Many such individuals reportedly filed nil tax returns, indicating tax avoidance despite having substantial earning potential.

The AGP identified several unresolved issues previously flagged in a 2016–17 special audit, including:

  • 1,807 unregistered individuals with industrial electricity connections under Sales Tax Law
  • 702 electricity and 992 gas connection holders who failed to file returns
  • 744 owners of vehicles above 1500cc engine capacity not registered or filing

Although the FBR claims it has introduced new enforcement policies and strategies, the AGP says no verifiable progress has been shared. A Departmental Accounts Committee (DAC) meeting in January 2025 instructed the FBR to provide a detailed update within 15 days — but no response was received prior to the finalisation of this report.

Key Recommendations:

  1. Mandatory registration of potential taxpayers based on data from utility services, motor vehicles, and foreign travel.
  2. Auditor access to data portals like Malomaat through mutually agreed protocols.
  3. Enhanced inter-agency coordination with NADRA, property registrars, and other withholding agents.
  4. Stronger internal controls to monitor compliance and enforce penalties.

The findings reflect ongoing structural inefficiencies in Pakistan’s tax administration, which the AGP warns could further constrain fiscal space unless urgent reforms are undertaken.

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