BUDGET 2026-27: Steeper fines introduced for tax compliance
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ISLAMABAD: The government has substantially increased penalties for late filing of income tax returns, restoration to the active taxpayers list, and deficiencies in document accessibility and formatting, apparently an effort to strengthen tax compliance. The increases, introduced through the Finance Bill FY27, apply across federal taxes, including income tax, sales tax and federal excise duty. In some cases, penalties have more than doubled and are widely seen as providing the Federal Board of Revenue (FBR) with an additional tool for revenue mobilisation. Under the proposed changes, the cost of returning to the active taxpayers list (ATL) has been raised fivefold for companies to Rs100,000 from Rs20,000, while it will increase to Rs50,000 for associations of persons from Rs10,000 and Rs25,000 for individuals from Rs1,000. The substantial increase is intended to improve tax compliance, but it will be punitive for small taxpayers. Finance bill expands FBR’s enforcement powers; ATL restoration costs jump fivefold; businesses risk sealing of premises The finance bill also enhanced penalties linked to audit proceedings across the board. Fines for failure to produce records have been raised from Rs25,000, Rs50,000 and Rs100,000 to Rs100,000, Rs200,000, and Rs300,000, respectively. The penalty for providing false or misleading information has been increased from Rs25,000 or 100pc of the tax shortfall (whichever is higher) to Rs500,000 or 100pc of the amount of the tax shortfall, whichever is higher. The penalty for concealing income or submitting incorrect details has been raised tenfold to Rs1 million from Rs100,000, while the existing provisions tied to the amount of tax evaded will continue to apply. Similarly, failure to deduct or collect withholding tax will now attract a penalty of Rs500,000, which was raised from the existing Rs40,000. Where the defaulter is a company, its principal officials will face an additional personal penalty of Rs500,000. The Finance bill a