The Pakistan Tax Bar Association (PTBA) has expressed concern that bureaucratic red tape is hindering the government’s efforts to reform the Federal Board of Revenue (FBR) and digitize its operations, which are intended to safeguard tax revenues, broaden the tax base, and alleviate difficulties for compliant taxpayers.
In a letter sent to the FBR chairperson on Wednesday, the PTBA pointed out that despite some reforms introduced through the Finance Act of 2024, bureaucratic delays have instead caused stagnation in business activities and contradicted the government’s claims of fostering a business-friendly environment.
The PTBA outlined several issues, particularly with tax officers issuing pre-suspension notices and demanding payments from taxpayers without conducting proper verification. In cases where taxpayers present documentary evidence supporting their input tax claims, tax officers reportedly continue to demand payments. Failure to comply results in the suspension of sales tax registration.
The PTBA emphasized that this approach directly contradicts the government’s stated commitment to a conducive business environment. The association called on the FBR to issue clear directions that, in proceedings involving input tax disallowances, action should only be taken after proper verification under Section 11. Taxpayers’ sales tax registrations should only be suspended if they fail to substantiate their claims, as ruled by the Supreme Court in the case of Commissioner Inland Revenue, Lahore vs Eagle Cable Private Limited, Lahore (CPLA 2400-L/2022).
Further, the PTBA highlighted that despite amendments to Section 21(5) of the Sales Tax Act, 1990, allowing taxpayers to represent themselves before the Chief Commissioners against suspensions, these appeals are often not addressed in a timely manner, resulting in complete disruptions to business operations.
The association also recommended that representations be filed through the Iris portal for transparency and proper documentation. This would enable the FBR to track the reasons for delays and resolve issues more efficiently.
Additionally, the PTBA raised concerns from its members in smaller cities about the transition from manual to electronic filing of appeals. Taxpayers face challenges, such as the requirement to submit physical files on hearing dates, and frequent instances where Commissioners are absent during video link hearings, leaving unauthorised staff or inspectors to conduct the hearings. The PTBA suggested that to ensure fairness, Commissioners should personally conduct online hearings.
The PTBA’s letter underscores the ongoing challenges in Pakistan’s tax system, calling for reform to streamline processes and reduce barriers for taxpayers, particularly in smaller cities.
