FBR Ordered to Explain Huge Fata Tax Waivers
A Senate panel has ordered the Federal Board of Revenue (FBR) to explain huge Fata tax waivers, demanding full records of a scheme under which imports worth Rs1,120 billion entered with tax exemptions.
A subcommittee of the Senate Standing Committee on Interior and Narcotics Control issued the order on Tuesday, directing the FBR to present complete records of consumption certificates, payments and verification documents at an in-camera meeting on November 16.
The committee is investigating alleged misuse of the exemption scheme for the former Federally Administered Tribal Areas (Fata) and Provincially Administered Tribal Areas (Pata), and recovery of evaded taxes. Senator Saifullah Abro chaired the meeting.
Fata tax waivers: the Rs730 billion gap
Customs import data and consumption certificates from 2018 to June 2026 showed a wide gap. Total imports were Rs1,120.66 billion, while certificates covered only Rs389.86 billion, leaving an apparent unreconciled difference of Rs730.79 billion.
Steel accounted for Rs148.25 billion, textile and fabric for Rs146.95 billion, food for Rs100.88 billion, and ghee and oil for Rs76.48 billion. The committee wants a full transaction-wise reconciliation to find the actual tax liability and any loss to the exchequer.
The Federal Investigation Agency (FIA) said it had issued 512 notices to companies. Only 19 joined the proceedings with partial records, while more than 100 notices were returned or undelivered. The matter is before a competent court, and possible corruption, abuse of authority and diversion are being examined separately under the law.
The chairman was also briefed about the FBR’s reluctance to share records with the committee, though it was ready to provide information to the court and other authorities. Citing Article 66 of the Constitution, Mr Abro questioned the legal basis for withholding information from parliament.
Why the panel is pressing the FBR
The exemptions were meant to encourage industry in the former tribal areas after the 2018 merger, when Fata joined Khyber Pakhtunkhwa. Under the Sixth and Eighth Schedules, companies there could import raw material without paying taxes charged elsewhere.
The question is whether the imported goods were ever used in the tax-exempt areas at all. Documents before the Senate show 1,256 companies received exemptions worth Rs216 billion between 2018 and 2026, while paying only about Rs35 billion in taxes. Some factories had registered addresses in tax-exempt areas but ran production elsewhere.
The chairman highlighted 20 certificates involving about Rs64 billion and told the FBR to provide full details and justification. He also referred to terms of reference covering about Rs74 billion and questioned payments released without adequate verification. Out of 223 companies, certificates are expected for 60.
The FBR said it had not received any formal notice from the court, while the FIA said its legal adviser had received the order. Members asked why the FBR had stayed unaware of court proceedings for nearly two months.
The chairman also criticised the absence of the Director General of the National Cyber Crime Investigation Agency, who was due to brief the committee.
What happens on November 16
The next meeting will be held in camera so the committee can examine sensitive records. The FBR must bring complete details of certificates issued from November 2025 onwards, with payments, pay orders and documents.
The chairman said the alleged tax liability could be substantial and the state must recover every rupee due. Many companies have already been referred to the FIA, and further cases remain under examination.
The case sits inside a wider debate about how Pakistan raises revenue. The federal government spent more than Rs5 trillion on devolved provincial subjects, a Senate panel was told, while development spending reached only 10.4 percent of the annual allocation in four months. The IMF has urged Pakistan to broaden its tax base.
If confirmed, the recovery could run into hundreds of billions of rupees. Pakistan’s trade deficit reached 14.6 billion dollars in July to October 2026.
Frequently asked questions
What is the Fata/Pata tax exemption scheme?
It let businesses in the former Federally Administered Tribal Areas and Provincially Administered Tribal Areas import goods without paying certain taxes, to encourage industry there after the 2018 merger.
How big is the gap the Senate panel found?
Imports from 2018 to June 2026 totalled Rs1,120.66 billion, but certificates covered only Rs389.86 billion, leaving an unreconciled difference of Rs730.79 billion.
What must the FBR bring to the next meeting?
Complete records of certificates, payments and verification documents, including certificates issued from November 2025 onwards, at an in-camera meeting on November 16.
How many companies are involved?
The FIA has issued 512 notices. Only 19 companies joined with partial records, and over 100 notices were returned or undelivered. Of 223 companies, certificates are expected for 60.
