LAHORE: The Tax Laws Amendment Ordinance, 2025, which empowers the Federal Board of Revenue (FBR) to seize untaxed goods and immediately recover taxes following superior court decisions, represents an extraordinary level of enforcement rarely seen in developed or competing economies.
Pakistan’s new provision (Section 138, sub-section 3A) allows tax authorities to recover dues instantly once a superior court upholds a tax liability, overriding existing procedural safeguards. In developed countries, due process is paramount; even after court rulings, enforcement typically permits appeals, structured payment options or grace periods.
For instance, in the US, the Internal Revenue Service (IRS) must issue a final notice and allow for administrative appeal or offer payment plans before enforcement. In Germany or France, final tax liabilities become enforceable only after all legal remedies have been exhausted, and even then, deadlines and taxpayer protections are maintained. In competing Asian economies, such as India, after a Supreme Court or high court decision, the Central Board of Direct Taxes (CBDT) usually issues administrative guidelines. Enforcement follows due process, including demand notices and opportunities to respond before recovery begins. Bangladesh and Vietnam similarly require tax authorities to observe proper timelines post-judgment.
Pakistan’s provision for immediate enforceability, without honouring existing procedural timelines, is exceptionally aggressive. The ordinance also allows the FBR to authorise any federal or provincial employee to seize goods lacking proper tax stamps, barcodes or labels. In developed economies, tax enforcement is strictly limited to designated officers of tax or customs departments. While seizures are permitted, they must follow clear legal procedures and are executed by trained officials. The random empowerment of unrelated civil servants is virtually unheard of. In India, for example, only designated Goods and Services Tax (GST) officers or customs officials are permitted to conduct raids or seize goods under strict protocols. In China, tax enforcement is centralised and professionalised, with local tax bureaus or customs authorities solely responsible -- never arbitrary civil servants.
Such sweeping authorisation granted to the FBR risks undermining predictability, professionalism and investor confidence. While these laws may strengthen state power, they are likely to erode business confidence. Pakistan’s economy already struggles with low tax compliance; such measures may exacerbate fears of arbitrary enforcement and further deter formalisation rather than promote it. The main risk is potential abuse of power by non-specialist government employees.
A more balanced alternative would follow the path of countries improving compliance through enhanced technology, such as digital invoicing and point-of-sale tracking. These countries typically apply gradual penalties, providing opportunities to rectify mistakes. They focus on building trust in institutions and ensuring non-discriminatory enforcement.
A comparison of the present law with practices in India, Bangladesh, and OECD economies reveals key differences. Pakistan’s Tax Laws Amendment Ordinance, 2025, introduces Section 138(3A) in the Income Tax Ordinance, allowing immediate tax recovery after a court judgment. The FBR is empowered to authorise any federal or provincial government employee to seize goods without valid tax stamps, and the law overrides procedural timelines, enabling enforcement without standard appeal processes.
In India, the Income Tax Act, 1961, and the Goods and Services Tax (GST) Act govern enforcement. Seizures are carried out under specific provisions by designated officers from the Income Tax Department and GST authorities. Proper authorisation is required, and taxpayers have the right to appeal and are provided with notices. Bangladesh’s Income Tax Ordinance, 1984, and the VAT and Supplementary Duty Act, 2012, stipulate enforcement measures under which seizures are conducted by designated tax officials from the National Board of Revenue (NBR), following defined legal provisions. Enforcement actions observe due process, and taxpayers are entitled to notices and appeal mechanisms. In OECD countries, national laws align with OECD guidelines, and enforcement actions are subject to legal procedures and taxpayer rights. Designated tax authorities, such as the IRS in the US and HMRC in the UK, are responsible for enforcement. A strong emphasis is placed on due process, and seizures and recoveries are conducted with judicial oversight and the right of appeal.