The Federal Board of Revenue (FBR) has been granted significant new authority under the Finance Act, 2025, allowing it to directly intervene and fix retail prices of goods in a concerted effort to curb tax evasion across Pakistan’s markets. This landmark move is set to reshape how businesses declare prices and contribute to the national exchequer.
According to Muhammad Zeeshan Merchant, former president of the Karachi Tax Bar Association (KTBA), the newly introduced amendments are designed to close loopholes that have historically allowed businesses to manipulate prices and evade taxes.
A key amendment targets the practice of excessive deductions, particularly in the beverage industry. Businesses can now only reduce retail prices by a maximum of 5% for costs such as chilling, storage, and handling. This measure directly addresses artificial price reductions that have led to significant tax shortfalls.
Perhaps the most impactful change is the FBR’s new power to directly fix retail prices where there is suspicion of market manipulation or tax evasion. This means if manufacturers or retailers are found to be deliberately underreporting product prices to avoid taxes, the FBR can now step in and determine the appropriate retail price.
Furthermore, a minimum retail price has been introduced for imported branded goods. These items must now be sold at no less than 130% of their customs-assessed value, which includes all duties and federal excise tax. This provision aims to prevent importers from undervaluing products at the retail level, ensuring fair tax contributions.
While these new powers are intended to enhance tax collection and combat under-invoicing, Merchant cautions that similar rules, previously issued through general orders, faced challenges. Applying them broadly across all imports could potentially lead to complications and even legal disputes from importers.
Nevertheless, this development signals a clear shift in the FBR’s approach, indicating a more proactive role in enforcing pricing transparency and aggressively cracking down on tax evasion within the retail sector.
