FBR Powers to Enforce Filing of Returns — What Non-Filers Need to Know

The Scale of the Problem

In 2023, Pakistan had approximately 11.4 million registered taxpayers — but only around 5.3 million actually filed their income tax returns. That's less than 50% compliance among registered taxpayers. The real gap is even wider when you include millions of people who should be registered but aren't.

FBR has been struggling with this compliance gap for years, and traditional measures haven't worked.

What FBR Has Tried So Far

Higher Withholding Tax for Non-Filers

The most significant measure has been doubling withholding tax rates for non-filers. In most transaction categories — banking, property, vehicles, dividends — non-filers pay twice the rate that filers pay.

While this creates a financial incentive to file, it hasn't been enough. Many non-filers simply absorb the higher cost rather than entering the tax system.

Section 114B — FBR's New Powers

Through the Finance Act 2022, FBR introduced Section 114B in the Income Tax Ordinance, 2001. This gives FBR unprecedented enforcement powers against non-filers:

1. Disable Mobile Phones and SIMs

FBR can direct telecom operators to deactivate mobile connections of non-filers. In a country where mobile connectivity is essential for business and daily life, this is a powerful pressure tool.

2. Disconnect Electricity

FBR can instruct electricity distribution companies to discontinue electricity connections to the premises of non-filers.

3. Disconnect Gas Supply

Similarly, gas connections can be discontinued for individuals and businesses that fail to file their returns.

4. Restrict Foreign Travel

FBR can place non-filers on the Exit Control List (ECL) or restrict their ability to travel internationally until returns are filed.

Will These Powers Work?

These are the most aggressive enforcement tools FBR has ever been given. Whether they will meaningfully improve compliance is still being debated. The practical implementation — identifying non-filers, coordinating with telecom companies and utilities — is complex. But the message is clear: the cost of not filing is going up significantly.

What You Should Do

If you're a non-filer, the safest course of action is to get compliant now — before enforcement ramps up. Our income tax team can help you file current and previous years' returns, get on the Active Taxpayer List, and avoid any disruption to your services. Contact us today.