50% of Pakistan’s Economy Runs on Black Money

Half of Pakistan’s economy is run on black money while tax authorities have now been cleared to hire 1,600 auditors to track non-filers and enforce the Tax Laws (Amendment) Bill 2024 on their finances. This was disclosed during a meeting of the National Assembly’s Standing Committee on Finance and Revenue today. Minister of State for Finance Ali Pervaiz Malik briefed the committee on the Bill which will be used to enforce long-standing efforts of the Federal Board of Revenue (FBR) to increase tax compliance and address undocumented wealth. The minister said the government has remained silent on non-filers for 75 years but is now addressing the issue. Under the new tax laws, non-filers will face restrictions like being unable to carry out big transactions such as buying property, and vehicles, or investing in businesses or equity. FBR Chairman Rashid Mahmood Langrial explained that the changes are designed to target high-income individuals (tax evaders) and businesses. The new laws will also grant FBR officers additional powers like blocking transactions involving black money and tax evasion. Also, the new bill introduces measures to recruit 1,600 auditors to strengthen revenue enforcement. However, several committee members expressed concerns about the bill’s implementation, particularly the potential disruption it could cause to the economy. Lawmakers said that rushing such big changes could lead to problems and recommended caution. There were also discussions on the challenges posed by Pakistan’s largely informal economy, with committee members pointing out that nearly half of the economy operates through black money. Some lawmakers argued that the bill might inadvertently harm the common people, especially in terms of their ability to purchase vehicles and property. The committee formed a five-member sub-committee to engage with stakeholders, including the FBR and the Association of Builders and Developers (ABAD) to review the Tax Laws (Amendment) Bill 2024. This sub-committee is expected to submit its report within 10 days and reveal more insights on how the bill may impact the property market and other sectors.