Government grants new powers to FBR to regulate retail prices in effort to combat tax evasion

The Federal Board of Revenue (FBR) in Pakistan has been granted additional powers to regulate retail prices of goods as part of the Finance Act, 2025. This initiative aims to address tax evasion issues in the country’s markets effectively. According to Muhammad Zeeshan Merchant, a former president of the Karachi Tax Bar Association (KTBA), significant amendments have been made to redefine the regulation of retail prices.

One of the key changes involves imposing a restriction on deductions for expenses like chilling, storage, and handling charges, particularly in the beverage industry. Businesses are now limited to reducing retail prices by a maximum of 5% for such expenses. This measure prevents artificial price reductions that often result in tax shortfalls.

A crucial development is the empowerment of the FBR to directly set retail prices for goods suspected of being involved in market manipulation or tax evasion. If manufacturers or retailers are found to be manipulating product prices to evade taxes, the FBR now has the authority to intervene and establish prices themselves.

Additionally, a minimum retail price for imported branded goods has been introduced. Imported goods must be sold at no less than 130% of their customs-assessed value, inclusive of duties and federal excise tax. This regulation aims to prevent importers from undervaluing products at the retail level.

While these changes are intended to enhance tax collection and curb under-invoicing, Merchant acknowledges that similar directives had been issued prior through general orders. Implementing these regulations across all imports could pose challenges and potentially lead to legal disputes from importers.

Nonetheless, these developments highlight the FBR’s increasing role in enforcing pricing transparency and combating tax evasion at the retail level. By granting the FBR the power to control retail prices of goods, the government is taking proactive steps to address tax evasion practices in Pakistan’s markets.