EDITORIAL: In yet another display of its highhandedness towards taxpayers, it has come to light that the Federal Board of Revenue (FBR) is issuing notices to salaried individuals on the basis that they are allegedly claiming improper credits for income tax deductions in their returns.
The move is a very obvious desperate attempt to bridge chronically unachievable revenue targets. The Karachi Tax Bar Association (KTBA) has highlighted, what is essentially, harassment of taxpayers by FBR in a letter to Member Inland Revenue Operations, revealing that hundreds of salaried individuals have received notices over apparent tax deduction discrepancies. These issues often arise when tax officers are either unable to verify deductions on the IRIS portal or cannot recover withheld tax amounts from employers.
Anyone with even a basic understanding of tax deductions for salaried individuals in Pakistan would recognise the futility and unfairness of holding employees accountable for discrepancies in their tax deductions, and in effect making them liable for their employers’ failure to deposit the correct amount of tax.
As is common knowledge, employers deduct income tax at source from employees’ salaries each month and deposit the amount so collected with the FBR. At the end of the financial year, salaried individuals file their tax returns based on the salary certificates issued by their employers, which detail total earnings and tax deductions, and enable employees to claim any applicable refunds or tax credits. As the KTBA rightly notes, any shortfall or unpaid tax should be addressed by questioning and recovering the amount from the withholding agent — the employer — rather than strong-arming individual employees.
Targeting the already overburdened salaried class, which faces the very high tax rates on its gross incomes and without the exemptions granted to other segments of the economy, underscores the immense pressure on tax officers to meet revenue targets.
This relentless pursuit is clearly driving them to desperate measures to boost collections, often by any means necessary, disregarding ethical or legal obligations. This is not the only instance of the tax bureaucracy shifting the onus of its incompetence and ineptitude onto other segments of the economy. As reported in this newspaper, FBR officials have been pressuring taxpayers to withdraw complaints against the tax authority filed with the Federal Tax Ombudsperson (FTO) on account of intentional delays in releasing refunds.
According to news reports, the FBR’s refund zones established within its field formations, under the guise of facilitating taxpayers, have instead become a tool for obstructing income tax refunds.
In one case, an income tax practitioner inquiring about a delayed refund on behalf of a client was warned it would be issued only if the client withdrew their complaint filed before the FTO. The concerned FBR official even threatened to file representation regarding the refund with the president, ensuring the taxpayer would not receive the refund for at least a year.
This and other unsavoury tactics are routinely employed by the tax bureaucracy in a bid to inflate collection figures, highlighting not just its dysfunction and lack of morality but also the relentless intimidation of taxpaying citizens.
The FBR faces a massive Rs468 billion shortfall in its revenue target for the July-January period, with fears that this figure could swell to Rs1 trillion by the end of the fiscal year. The tax bureaucracy must realise that absurd, ineffective tactics won’t bridge this gap and will only further erode the taxpayer’s trust and confidence in the system.
The core issues — a narrow tax base and rampant tax evasion — have long been acknowledged. Without structural reforms to address these fundamental challenges, the FBR will continue to flounder.
Resorting to fruitless, short-term measures will do little to improve revenue collection or restore public confidence in the tax system which is essential for the much-needed widening of the taxpayer base.
Copyright Business Recorder, 2025
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