FBR gets new powers for immediate tax recovery

May 05, 2025 (MLN): The federal government has declared the “Tax Laws (Amendment) Ordinance, 2025,” introducing far-reaching changes aimed at accelerating the recovery of taxes in Pakistan.

The ordinance confers extensive powers to the Federal Board of Revenue (FBR), allowing it to recover taxes immediately following judgments by the High Court or Supreme Court.

Once such decisions are made, the FBR can proceed to attach bank accounts, seal business premises, and seize both movable and immovable assets without serving any prior notice.

Legal experts interpret this as a shift that overrides all existing laws and judicial timelines, as per the press release.

Taxes will now be deemed payable as soon as a verdict is delivered by a superior court, leaving no space for suspension during appeals.

This directly impacts cases like the Pakistan LNG dispute, where, according to experts, Rs 5-6 billion remained unrecovered from a telecom firm due to earlier procedural delays.

Modifications have been introduced to both the Income Tax Ordinance, 2001, and the Federal Excise Act, 2005. Section 138, which deals with recovery from property and arrests, and Section 140, concerning recovery from third parties holding taxpayer funds, have been amended to reflect the new authority.

Under these changes, court decisions trigger immediate enforceability of tax dues.

The ordinance also inserts provisions enabling the FBR and Chief Commissioners to deploy officers at business and industrial premises.

These officers are tasked with monitoring production levels, tracking unsold inventory, and inspecting the supply chain including counterfeit goods under the framework of the Federal Excise Act.

However, the sweeping nature of these powers has raised alarms among tax professionals.

They warn that eliminating due process may harm investment sentiment—both local and foreign—and erode public confidence in the taxation system.

Critics say that the ordinance strips taxpayers of recourse and undermines their ability to contest aggressive recovery measures.

Prominent tax lawyer Waheed Shahzad Butt strongly criticized the move, describing it as an erosion of the rule of law.

Referring to the Islamabad High Court's earlier ruling in the Pakistan LNG case, he emphasized the need to uphold procedural fairness to protect taxpayer rights.

Butt argued that the current ordinance opens the door to arbitrary enforcement actions, leaving businesses and individuals exposed to unchecked state power.

The ordinance, effective immediately, has been promulgated under Article 89 of the Constitution, eliminating the need for prior parliamentary approval.

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