ISLAMABAD: The country’s top tax machinery is confronted with a big dilemma of nil-filers, which has reached an alarming level of nearly 39 per cent of total income tax returns in the tax year 2025, Dawn has learned from official sources.
This presents a big challenge for the government in identifying individuals not paying their taxes, with 2.262 million out of 5.912 million filed up to Oct 31, potentially concealing their taxable income. This means that only 3.650m taxpayers declared incomes in their returns for tax year 2025 (TY25).
The pattern of nil-filers are across the three main categories — individuals, associations of persons (AoPs) and the corporate sector. The nil returns are submitted for one-time financial transactions or to take advantage of lower tax rates for placement on the Active Taxpayers List (ATL).
Concerns are mounting within the FBR that Pakistan’s income tax system is failing to capture the true wealth of its citizens, as approximately half of taxpayers continue to declare nil incomes far below the lavish lifestyles they maintain.
Zero income with lavish lifestyle exposes weak enforcement as millions stay on the rolls without paying a rupee
In TY25, the number of nil-filers, both salaried and non-salaried individuals, remained significantly high. Out of 5.805m total individual returns filed, 2.206m were nil-returns, declaring no taxable income.
This means 38pc of all individual filers fell into the nil-filer category, highlighting a growing trend of non-contributory filings and raising concerns about the quality of the tax base. In TY24, almost a similar trend of nil-filers was recorded, which shows consistency of the trend.
Despite being considered a highly documented segment, the corporate sector posted the highest proportion of nil-filers in TY25. Of the 17,873 corporate returns filed, 13,739 companies, accounting for 76.87pc, declared nil income.
This means only 4,134 companies reported any taxable income, raising concerns over underreporting and the effectiveness of enforcement within the formal business sector.
The second-largest category of nil-filers in TY25 was Associations of Persons (AOPs). Out of 89,510 AOP returns filed, 42,834, or 47.85pc, declared nil income. This indicates that only 46,676 AOPs reported any taxable income, highlighting significant underreporting within this segment of taxpayers.
This pattern appears to be continuing for the last few years owing to the government’s introduction of the higher rates for non-filers. It was also proposed that non-filers be prohibited from engaging in any financial or investment activities. As a result, the junk filing has become a routine practice, which gives a feel good figure of returns filing to FBR.
People are living in palatial houses, enjoying 24/7 air conditioning, riding fancy cars, wearing branded clothes, making multiple international trips, buying branded watches/jewellery and other luxuries but their income tax returns do not reflect their lifestyles. Income declared and tax paid is not reflective of their living standards, as pointed out after an internal analysis of the tax returns filed with the FBR.
A senior tax officer told Dawn that junk returns resulted from tax policy lacunas. He stated the existing policy encourages people to submit tax returns without paying taxes to benefit from reduced tax rates. He said the FBR would have to redefine the terms filer and non-filer and relate tax return filing exclusively to tax payment.
He went on to say that the present system suffers from data integration issues.
Pakistan’s cash-driven and largely undocumented economy continues to shield undeclared wealth from formal scrutiny. This undocumented economy continues to frustrate efforts to broaden the tax base.
Published in Dawn, December 14th, 2025
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