The Federal Board of Revenue (FBR) has ordered strict tax scrutiny of major exporters across Pakistan after observing a sudden and concerning decline in the taxable income declared in recent returns. The move signals a tougher stance by the tax authority to curb underreporting and strengthen compliance within the export sector.

According to official directives, FBR field offices have been instructed to thoroughly review tax returns of leading exporters, particularly those operating in Karachi, Lahore, and Islamabad. The board has warned that exporters found understating income without valid justification could face legal action under prevailing tax laws.

Focus on major exporters

Following recent amendments to the Income Tax Ordinance, especially Section 154, the FBR has directed its field formations to identify and scrutinize between 10 and 30 major exporters in each of the three major cities. These exporters will be assessed for inconsistencies between their declared income and actual business activity.

Officials noted that after the introduction of a minimum tax on export income under the Finance Act, there has been a noticeable trend of exporters reporting lower taxable income. The FBR believes this decline does not align with export performance data and broader economic indicators, raising red flags within the tax system.

Legal action warning for underreporting

The FBR has issued a clear warning that exporters who fail to provide valid reasons or documentary evidence for reduced income declarations may face penalties, audits, and legal proceedings. All suspicious and high-risk cases identified during the scrutiny process must be compiled and forwarded to FBR headquarters by January 1, 2026.

This deadline underscores the seriousness of the initiative and reflects the board’s determination to address tax evasion in sectors that contribute significantly to Pakistan’s foreign exchange earnings.

Strengthening transparency in export taxation

The FBR’s action is part of a broader strategy to enhance transparency and improve revenue collection, particularly from high-value sectors. Authorities believe that ensuring fair taxation of exporters is critical for maintaining fiscal discipline and supporting Pakistan’s economic stability.

Tax officials emphasized that the scrutiny exercise is not meant to discourage exports but to ensure that all businesses operate within the legal framework. Exporters who are fully compliant and transparent, they added, have nothing to fear from the review process.

Export sector under close watch

With exports playing a vital role in Pakistan’s economy, the FBR has reiterated that accurate income reporting is essential for policy planning and revenue mobilization. The board has also encouraged exporters to cooperate with tax authorities and proactively address any discrepancies in their filings.

As enforcement measures tighten, the coming months are expected to test the compliance culture within Pakistan’s export sector, with the FBR signaling zero tolerance for deliberate underreporting.