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ISLAMABAD: In a significant move aimed at expanding the country’s narrow tax net, the federal government has granted authority to the Federal Board of Revenue (FBR) to station tax officers at various business locations.
This deployment is intended to oversee production, inventory, the flow of goods, and the provision of services—particularly in the service industry, which remains largely undocumented.
On Monday, Prime Minister Shehbaz Sharif was briefed on three substantial amendments introduced through the Tax Laws (Amendment) Ordinance, 2025, which address critical gaps in the tax framework from legal, administrative, and enforcement perspectives.
A pivotal change involves Section 175C, which allows for the physical presence of FBR officials at business premises. The focus is to enhance monitoring of high-revenue service sectors currently operating outside the formal tax regime. This provision, however, does not apply to traders already governed by Section 40B of the Sales Tax Act, 1990.
The intention behind this measure is to ensure equitable tax oversight across all sectors, including services, which account for a large portion of economic activity but are notoriously underreported. According to government estimates, the informal economy represents over 30% of the national GDP.
This initiative responds to growing discontent among the salaried class and formal manufacturers, who bear a disproportionate share of the tax burden.
By bringing more service-oriented businesses into the tax net, the FBR aims to increase public revenues and create room for possible reductions in income tax rates for salaried workers.
The service sector contributes approximately 60% of the GDP, yet remains underregulated, with over 70% of enterprises reportedly operating without registration.
The FBR’s monitoring strategy targets high-income businesses that remain underreported.
Among the primary targets are restaurants, hotels, guest houses, wedding venues, clubs, courier services, beauty salons, medical clinics, hospitals, diagnostic labs, gyms, currency exchange firms, and photographers.
It has come to light that some private hospitals charge Rs100,000 to Rs200,000 per day for inpatient accommodations—rates that surpass those of luxury hotels.
Many such institutions underdeclare their earnings and fail to meet tax compliance requirements, eroding public confidence and depriving the nation of essential revenue needed for welfare and infrastructure projects.
The revised law introduces a monitoring structure that incorporates oversight mechanisms to ensure accountability.
FBR officials must operate within clearly defined guidelines, under strict standard operating procedures (SOPs), and in coordination with other regulatory bodies to curb misuse of authority and harassment of businesses.
Statements by the Prime Minister
Prime Minister Shehbaz Sharif reiterated that the government’s tax reforms are designed to alleviate the financial strain on ordinary citizens.
He stated that the latest changes to the Income Tax Ordinance and Federal Excise Act aim to eliminate barriers in revenue collection.
In a statement from the Prime Minister’s Office, it was affirmed that these legal revisions are intended to streamline tax payments without infringing on the rights of compliant individuals and entities.
The premier directed authorities to step up enforcement against tax evasion, under-invoicing, and irregularities across various economic sectors.
He also instructed legal proceedings to be initiated against the illegal trade of cigarettes and other goods.
During the meeting, updates were provided on measures taken to detect and prevent tax evasion within industries such as tobacco, cement, poultry, sugar, and beverages.
Officials also briefed the prime minister on progress made in digital surveillance, including the track-and-trace system.
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Authorities reported that the FBR has been able to identify discrepancies in several industries through video surveillance, and that provincial governments now possess the authority to seize contraband goods under new arrangements.
Details of the Amendments
The first significant legislative change pertains to Sections 138(3A) and 140(6A) of the Income Tax Ordinance.
These provisions require taxpayers to immediately satisfy outstanding tax liabilities, even if an appeal is underway or a stay order has been issued—provided that the case has already been conclusively ruled on by a superior court.
Following a recent constitutional change, specialized benches have been formed in the higher judiciary to expedite tax litigation under the supervision of the Chief Justice of Pakistan.
Despite these expedited proceedings, a legal loophole previously allowed taxpayers to delay payments on final court decisions by up to 30 days, leading to billions in unrealized revenue.
The new amendment aims to eliminate that delay by facilitating swift execution of judicial verdicts.
It’s important to note that this rule does not apply to cases at lower appellate levels, such as commissioners, appeals commissioners, or Inland Revenue Tribunals.
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The provision is strictly confined to final decisions by the High Courts or the Supreme Court, and does not override any valid stay orders issued by these courts.
Rather, it seeks to reinforce court-ordered tax recoveries where no legal stay is in place.
The second major amendment clarifies the protocols for FBR visits to private businesses that have not previously been under FBR jurisdiction.
Any such inspections must be officially sanctioned through a bar-coded authorization letter, and FBR officers must document their activities using mobile devices for real-time transparency.
The officers are required to use standardized forms, which must be submitted digitally through a mobile app and physically delivered to either the chief commissioner or FBR headquarters.
These field activities are also monitored by civil intelligence agencies, and any misconduct reported—whether by businesses or intelligence services—is subject to immediate inquiry and disciplinary action.
Reaction from Business Chambers
The Karachi Chamber of Commerce and Industry (KCCI) has expressed strong opposition to the inclusion of Sections 138(3A) and 140(6A), arguing that these amendments could undermine rulings made by superior courts.
KCCI Chairman Mohammad Jawed Bilwani noted that the new rules create anxiety in the business community, as they enable authorities to collect disputed taxes even when relief has been granted by judicial bodies.
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Similarly, Mian Abuzar Shad, head of the Lahore Chamber of Commerce and Industry (LCCI), issued a statement condemning the new tax measures, claiming that the government failed to consult key stakeholders prior to implementing them.
“These changes are both dangerous and unfriendly to business,” he said. “We therefore unanimously call for the immediate withdrawal of these amendments or at least subject them to parliamentary review with proper consultation.”
