FBR’s masterclass in policy uncertainty

EDITORIAL: Businesses in Pakistan are increasingly being asked to navigate a tax administration that appears to regard uncertainty as a policy instrument. The Federal Board of Revenue (FBR) announces a reform, changes compliance procedures, and expects the private sector to absorb the disruption. When objections emerge, they are too often dismissed as resistance to change. The result is a widening gap between claims of facilitation and the experience of the businesses the FBR is supposed to serve.

The dispute over Faceless Customs Assessment (FCA) is a case in point. The FBR has rejected the All Pakistan Textile Mills Association’s (APTMA) concerns about clearance delays, valuation disputes and laboratory referrals, saying its figures largely reflect the initial months of implementation. It says average clearance time has fallen from 40.2 hours to 20.57 hours, with 83 percent of consignments cleared within 48 hours. These figures may indicate progress, but they do not dispose of industry complaints. Inviting trade bodies to submit individual Goods Declaration numbers is no substitute for examining whether the system itself is creating avoidable problems.

Relocating the Central Appraising Unit to Islamabad is a major change to customs assessment. Why undertake such a restructuring without meaningful input from importers, exporters, and manufacturers who must live with its consequences? Physical examination and port operations may remain in Karachi, but separating assessment from the port can create delays and coordination problems.

The FBR’s insistence that the relocation is irreversible, while promising to address operational difficulties, suggests the decision has been settled before the evidence is fully heard. That is a peculiar way to build confidence in a reform supposedly designed to improve efficiency.

The new procedure for additional sales tax on electricity consumed by steel manufacturers using captive power or self-generation raises similar questions. It requires special payment challans, computerized receipts, records of electricity generation and consumption, and corresponding entries in sales tax returns.

The General Order, issued on October 30, nevertheless takes effect from July 1, 2026. Businesses are expected to comply retrospectively with a procedure notified months after its effective date. Such treatment makes planning and compliance harder, not easier.

The revision of duty drawback rates for textile, leather, engineering, and miscellaneous exports adds to an already complicated policy environment. Exporters must follow detailed schedules, document imported inputs and meet deadlines to recover customs duties.

Duty drawback can support export competitiveness, but its value is diminished when procedures are cumbersome or changes arrive without adequate preparation. When Pakistan urgently needs investment and export earnings, the state should be removing friction from production and trade, not multiplying it.

These examples point to a deeper failure of institutional judgement. The FBR repeatedly misses its revenue targets, yet its response remains more directives, controls, and compliance burdens.

Meanwhile, allegations and stories of corruption within the tax machinery continue to surface, eroding the credibility of an institution demanding greater transparency from taxpayers. Before imposing another layer of scrutiny on businesses, the FBR should demonstrate that its own systems are accountable, predictable, and free from abuse.

How, in these circumstances, is private investment supposed to recover? Investors need clarity about tax rates, customs procedures and the rules governing a project. They cannot commit long-term capital when official mechanisms appear arbitrary, implementation dates are retrospective and stakeholder objections are brushed aside. Uncertainty raises the cost of doing business and encourages investors to delay, scale back or take their money elsewhere.

Digitalisation and customs modernisation are legitimate objectives. But technology cannot compensate for poor consultation, weak execution or an institutional culture that treats criticism as obstruction.

The FBR’s reforms will remain self-defeating until it listens before issuing instructions, tests procedures before imposing them and accepts responsibility when they fail. Pakistan needs a tax authority that enables economic activity and collects revenue through confidence and compliance, not one that makes investment a test of endurance.

Copyright Business Recorder, 2026