FBR starts scrutiny of exporters after change in tax regime

The Federal Board of Revenue (FBR) started strict scrutiny of exporters after a massive decline was witnessed in exports following after change in the tax regime, reported 24NewsHD TV channel on Wednesday.

The FBR highlighted that significant amendments were made in Section 154 of the Income Tax Ordinance, 2001, through the Finance Act, 2024.

During fiscal year 2025, the majority of exporters showed less income, but later they were shifted to a lower tax regime category under the Finance Act 2025.

FBR directed all Chief Commissioners of Inland Revenue to scrutinise the financial statements of big exporters.

Field formations are directed to identify unusual patterns, inconsistencies, and unjustified reductions.

The FBR stated that strict legal action will be taken against exporters who understate their income without justification.

Directions were given to Large Taxpayers Offices (LTOs), Central Tax Offices (CTOs), and Regional Tax Offices (RTOs) to prepare a list of top exporters from Karachi, Lahore, Faisalabad, Islamabad, Sialkot, and Multan.

FBR sought data of the top 10, top 20, and top 30 exporters separately. The FBR has also released a specific Google Sheet and Excel format for data submission.

Previously, tax collected under Section 154 at a rate of 1% of export proceeds was treated as the final tax on exporters’ income. However, with the latest amendment, this tax is now considered a minimum tax, compelling exporters to declare their full income and assets.

Tax experts explained that the removal of the final tax regime aims to increase transparency and prevent underreporting of earnings by exporters. The FBR believes this policy shift may have contributed to lower tax compliance, necessitating an audit to ensure exporters meet their tax obligations.

Reporter: Kaleem Akhtar