TPAP, PRIME raise concerns over tax amendments

ISLAMABAD: The Tax Payers Alliance Pakistan (TPAP) and the Policy Research Institute of Market Economy (PRIME) have jointly expressed serious concerns over the recently issued Tax Laws (Amendment) Ordinance, 2025.

In a joint statement issued on Wednesday, both organisations argued that certain provisions within the ordinance could potentially undermine fundamental legal safeguards and principles that are essential for a fair and transparent tax system.

The ordinance, which amends Sections 138 and 140 of the Income Tax Ordinance, 2001 (XLIX of 2001), has sparked considerable debate among legal experts, tax professionals, businesses and civil society. While its stated objective is to expedite tax collection and improve enforcement, stakeholders are concerned that it may have adverse implications for taxpayer rights and procedural due process.

Raja Amer Iqbal, chairperson of TPAP, notes that: “These amendments will further marginalise existing taxpayers and discourage potential taxpayers from entering the tax base. Such policies may yield short-term revenue gains but will have negative ramifications on economic growth, exacerbate the parallel economy and stifle private sector investment, including both local and foreign. Ultimately, this could lead to increased unemployment among the youth.”

He further added, “A balanced approach is crucial to fostering a conducive business environment and sustainable economic development.”

These provisions grant the Federal Board of Revenue (FBR) expanded authority to enforce recoveries even when a taxpayer may be seeking appellate review or pursuing legal remedies. This raises constitutional and legal concerns, particularly regarding the right to a fair hearing and due process. Several legal professionals have noted that the ordinance appears to override established judicial precedents and procedural safeguards.

The principle that individuals should have the opportunity to be heard before enforcement action is taken is a cornerstone of administrative justice. Curtailing this right may impact public confidence in tax administration and the authority of the judiciary.

Empowering tax authorities to recover liabilities immediately, even in the presence of ongoing legal challenges, may increase the risk of overzealous enforcement. There is concern that such discretion, without adequate checks and balances, could result in unintended consequences, particularly for compliant taxpayers facing disputed assessments. Over 108,000 tax cases are currently pending in various courts across Pakistan, involving approximately Rs4.457 trillion in revenue. This backlog highlights systemic challenges in tax dispute resolution and underscores the need for balanced enforcement rather than expedited action without recourse.

Predictability and fairness in tax administration are crucial for fostering business confidence. Sudden enforcement actions, especially near fiscal year-end, may be perceived as efforts to meet revenue targets without adequate taxpayer facilitation. Such perceptions could discourage investment and create uncertainty among both domestic and international investors. The International Monetary Fund (IMF) has highlighted that Pakistan’s narrow tax base and challenges in tax administration contribute to economic vulnerabilities.

In its recent assessment, the IMF noted that strengthening governance and ensuring fair tax practices are essential for fostering a conducive investment climate.

TPAP and PRIME, along with allied organisations, have emphasised the need to balance revenue imperatives with constitutional protections and judicial oversight. Legal experts have also cautioned against legislation that could diminish the judiciary's role in adjudicating tax matters. A well-functioning taxation system should encourage voluntary compliance through transparency and fairness. The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has expressed concerns over abrupt tax enforcement measures, stating that such actions can undermine business confidence and deter investment. The FPCCI advocates for a balanced approach that ensures compliance while safeguarding taxpayer rights.

The Organisation for Economic Co-operation and Development (OECD) recommends that tax administrations adopt transparent and fair procedures, ensuring that taxpayers have the right to appeal and that enforcement actions are proportionate. These best practices aim to build trust in the tax system and encourage voluntary compliance, they said.

Under many reforms suggested by commissions and donor reports, an element of certainty and transparency was highlighted. Moreover, any change in the tax code, except for Finance Bill budgets, was discouraged. Despite the FBR being in the process of formulating budgetary proposals, the sudden enforcement of major changes in compliance laws jeopardises the fair and transparent fiscal process and increases uncertainty about tax laws. Businesses are already overburdened with predatory tax practices such as business-choking WHT tax regimes, excessive documentation, higher import stage taxes, while refunds and rebates, which should be swift and automated, are delayed beyond their normal timeframe. Such abrupt measures would only increase distrust in the government, increase informality in the economy and hinder growth.

In light of these concerns, TPAP and PRIME jointly urge the government to ensure taxpayers retain the right to be heard before enforcement actions, align enforcement mechanisms with due process and judicial safeguards, maintain the independence and authority of the judiciary in tax-related matters, and foster a collaborative approach that supports long-term tax compliance.