ISLAMABAD: Economic Policy and Business Development (EPBD) - a Think Tank has asked the government to immediately withdraw Tax Laws (Amendment) Ordinance 2025, as it would create cash flow disruptions for business community and undermines judicial safeguards that protect businesses during tax disputes.
According to an analysis of EPBD of the said Ordinance on Tuesday, it explained that the Tax Laws (Amendment) Ordinance 2025 (Ordinance No. IV of 2025), promulgated by the President on May 2, 2025, introduces three significant amendments that pose grave concerns for Pakistan’s business community at a critical economic juncture.
Our analysis reveals serious issues with these amendments. First, changes to Sections 138(3A) and 140(6A) of the Income Tax Ordinance empower tax authorities to demand immediate payment when cases are decided by courts, effectively nullifying established legal timeframes and judicial stays. This creates potential for catastrophic cash flow disruptions and undermines judicial safeguards that protect businesses during disputes.
Second, the new Section 175C grants unprecedented authority to tax officials to maintain continuous presence at business premises for monitoring operations. This surveillance mechanism will disrupt business activities, compromise confidential information, and increase compliance costs for enterprises already struggling in challenging economic conditions.
Third, amendments to the Federal Excise Act dramatically broaden the government’s seizure powers, allowing confiscation of goods based on technical non-compliance while extending enforcement authority beyond specialized tax officials to any government officer, creating heightened business uncertainty.
These measures appear particularly unjustified given the remarkable improvement in tax compliance despite challenging economic conditions. The cumulative impact of these amendments extends far beyond tax administration and threatens fundamental aspects of Pakistan’s economic environment. The creation of an unpredictable tax regime with diminished procedural safeguards signals a disregard for legal due process that will inevitably damage Pakistan’s international competitiveness and deter both domestic and foreign investment at a time when capital formation is critically needed.
The financial stability of businesses across sectors is placed at risk through the threat of unexpected tax demands that bypass normal judicial processes. Companies will be forced to maintain excessive cash reserves as protection against sudden tax liabilities, thereby reducing productive investment and economic growth potential. The diversion of management attention toward compliance with intrusive monitoring requirements will further impede business efficiency and innovation.
Of particular concern are the constitutional implications of these amendments. By effectively limiting the authority of the courts to grant meaningful relief through stays and appeals, these provisions challenge fundamental protections established under Article 199 of the Constitution. The undermining of judicial authority and the resulting threat to separation of powers represents a troubling precedent that extends beyond tax matters to broader questions of governance.
EPBD recommends that the government:
(i) Review and withdraw the Ordinance to allow for open parliamentary debate and comprehensive stakeholder consultations. This would ensure that revenue objectives can be balanced against economic stability and constitutional principles through a deliberative process.
(ii) Restore established legal timeframes for tax recovery and respect judicial stays and appeals as foundational elements of Pakistan's legal framework. A more balanced approach would implement targeted rather than blanket monitoring provisions and create robust safeguards against official overreach.
(iii) Establish a structured business-government dialogue to address legitimate revenue concerns through consensus rather than unilateral action. If the government is serious about sustainable revenue generation, it must focus more on rightsizing and rationalizing expenses rather than implementing measures that undermine business confidence and economic stability.
EPBD stands ready to facilitate constructive engagement to develop balanced policies that serve both fiscal needs and economic growth objectives. The goal is a prosperous, competitive, and economically stable Pakistan, and achieving this requires a predictable and fair tax regime that supports business growth rather than impedes it. The business community remains committed to contributing its fair share to national development, but this must occur within a framework that respects rule of law and economic sustainability.
Copyright Business Recorder, 2025
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