Islamabad: In a fresh move to broaden the tax net and tackle chronic evasion, the Federal Board of Revenue (FBR) has started issuing notices to jewelers across Pakistan who have failed to register or file returns. Officials confirmed that notices have already been served to jewelers in Rawalpindi, Islamabad, Faisalabad, and Multan, directing them to clarify their tax affairs or face legal consequences.
The Start of a Wider Crackdown
According to FBR sources, the jewelry sector has long been on the radar due to its large-scale cash transactions, underreporting of sales, and reluctance to formally document earnings. Despite being a high-value business with significant profit margins, compliance in the sector has remained minimal.
This week’s notices mark the beginning of an aggressive campaign against tax defaulters in the gold trade. The FBR has sought detailed responses from jewelers who either never registered with the tax authority or have failed to file returns despite being registered.
At the same time, FBR’s Intelligence and Investigation Wing also raided a major real estate company in Islamabad, signaling that the campaign is not confined to jewelers alone but is part of a broader effort to strengthen documentation across various cash-heavy sectors.
Shocking Compliance Gaps Revealed
Recent reports revealed striking gaps in compliance within the jewelry sector. Out of nearly 60,000 jewelers identified across Pakistan, only 21,000 are currently registered with the FBR. Even more concerning, of these registered jewelers, only 10,524 have filed income tax returns.
This leaves nearly half of registered jewelers — and the vast majority of unregistered ones — outside the formal tax net. Officials estimate that billions of rupees in potential revenue are being lost annually due to underreporting and tax evasion in the gold and jewelry trade.
FBR insiders explained that while jewelers do report some income, most significantly understate their earnings. By declaring lower volumes of business or manipulating invoices, many manage to pay far less tax than they actually owe. “The culture of tax evasion is deeply entrenched in this sector,” one official admitted. “Our aim is to ensure fair contribution without crippling businesses, but compliance cannot be optional anymore.”
First Phase Targets 900 Jewelers in Punjab
As part of the new campaign, the FBR has already prepared a list of 900 jewelers in Punjab who are believed to be non-compliant. This first phase will serve as a test case for expanding the drive nationwide. Authorities have indicated that once Punjab’s list is exhausted, similar campaigns will be launched in Sindh, Khyber Pakhtunkhwa, and Balochistan.
Tax authorities say these jewelers were identified using a combination of data analytics, sales records, property holdings, and lifestyle assessments. Many operate large, high-profile shops in major markets but continue to report negligible or zero taxable income.
Industry Reaction
The jewelry trade, traditionally a powerful lobby, is expected to resist the crackdown. In the past, jeweler associations have argued that FBR’s methods are heavy-handed and do not account for seasonal variations in demand. They have also claimed that much of the trade operates on small margins and involves rural markets where documentation is difficult.
However, experts counter this by pointing out that the gold trade involves significant cash circulation and that jewelers often act as informal money handlers in addition to selling ornaments. “This is one of the most lucrative sectors of Pakistan’s retail economy,” said a tax analyst. “If they are allowed to remain undocumented, the entire tax system loses credibility.”
FBR’s Broader Documentation Drive
The latest actions are part of a wider campaign by the FBR to bring untaxed wealth into the formal economy. In recent months, FBR has focused on real estate, retail, and wholesale markets, where underreporting is rampant. The raid on a major Islamabad real estate firm this week highlights that authorities are simultaneously targeting multiple sectors.
Pakistan’s low tax-to-GDP ratio, which has hovered around 9–10 percent, is one of the lowest in the region. Successive governments have struggled to expand the tax base, with less than 4 million people filing returns in a country of over 240 million. Bringing jewelers and property developers into compliance is seen as a crucial step toward boosting revenue.
Challenges Ahead
While the notices represent progress, experts warn that the road ahead is not easy. Previous attempts to tax jewelers often ended in stalemates due to political pressure, protests, and lack of enforcement. This time, however, officials say the government is determined to push forward, especially under the pressure of fiscal deficits and International Monetary Fund (IMF) commitments.
An FBR spokesperson said: “We cannot allow entire sectors of the economy to remain outside the tax system. This is not about harassment but about fairness. If salaried individuals and small shopkeepers are paying taxes, then why should multi-million-rupee jewelry businesses be exempt?”
Outlook
The coming weeks are expected to reveal whether the FBR can sustain this momentum. Much depends on whether the 900 jewelers targeted in Punjab respond positively or resist compliance. Legal battles are also likely, as traders challenge the notices or seek political backing.
Nevertheless, the issuance of notices sends a strong signal: the jewelry trade is no longer untouchable. With nearly 50,000 jewelers still unregistered, the FBR has a long way to go, but the initial push indicates a clear intent to change the culture of evasion.
