The Federal Board of Revenue (FBR) has recorded a 7% year-on-year decline in tax collection on cash withdrawals during the fiscal year 2024–25, signaling growing challenges in widening the tax base and changing financial behaviors among non-filers.
Official data released by the FBR shows that Rs30 billion was collected in withholding tax on cash withdrawals, down from Rs32.25 billion in the previous fiscal year. The tax, levied under Section 231AB of the Income Tax Ordinance, 2001, targets individuals not listed as active taxpayers and is collected through banks at a rate of 0.6% on daily withdrawals exceeding Rs50,000.
Reintroduced via the Finance Act, 2023, the provision was intended to generate additional revenue from non-filers, with the cumulative daily threshold designed to capture high-volume cash users. However, the latest figures suggest a contraction in taxable transactions.
Analysts attribute the drop to several factors, including a growing preference for digital and mobile payments, as well as greater awareness among non-filers about how to stay below the taxable threshold. “More people are splitting withdrawals or using non-cash channels, which dilutes the effectiveness of this withholding tax,” one taxation expert noted.
The FBR acknowledged the downward trend but emphasized its continued commitment to enhancing tax compliance and ensuring broader contribution from all sectors. “The decline underscores the need to reassess strategies to bring more individuals into the formal tax net,” an FBR official said.
In parallel, the Pakistan Business Council (PBC) has submitted proposals aimed at improving tax policy effectiveness, including suggestions to reevaluate thresholds, expand digital integration, and refine taxpayer profiling to reduce revenue leakages.
With evolving financial habits and technology adoption influencing traditional tax streams, authorities may need to adapt collection mechanisms to ensure sustained revenue without hampering financial inclusion or digital progress.
