Law promulgated for sudden tax recovery

ISLAMABAD: The federal government Saturday promulgated, “Tax Laws (Amendment) Ordinance, 2025” for immediate/ sudden recovery from taxpayers’ bank accounts or other movable/ immovable properties and sealing of business premises after the decision from higher courts without any further notices.

The Ordinance has also empowered the Federal Board of Revenue (FBR) to depute tax officials at manufacturing/ business premises to monitor production, supply, and stock of unsold goods.

“Tax would become immediately payable once decided by a High Court or Supreme Court of Pakistan, overriding any timeline given by other laws or judgments,” a tax expert explained.

Salaried individuals: FBR issues ‘frivolous’ tax recovery notices

The powers of the FBR officials have been considerably enhanced for recovery through attachment and sale of any movable or immovable properties of taxpayers, tax expert added.

President Asif Ali Zardari has promulgated Tax Laws (Amendment) Ordinance, 2025 to amend Income Tax Ordinance, 2001 and Federal Excise Act, 2005.

The Tax Laws (Amendment) Ordinance, 2025 has amended Section 138 (recovery of tax out of property and through arrest of taxpayer) and Section 140 (recovery of tax from persons holding money on behalf of a taxpayer).

According to a tax expert, one of the effects of the amendment is that courts and tribunals - at the time of issuing a judgment on a tax matter - cannot suspend recovery of the tax due in order to enable the taxpayer to lodge an appeal without facing the department’s coercive action for recovery of the tax due.

The second and the more important effect is that tax assessed against a taxpayer shall be immediately recoverable or recoverable upon the expiry of the time mentioned in the notice issued under Section 138/ 140 of the Ordinance notwithstanding anything contained in the Ordinance. For example, the time enshrined in Section 137 of the Ordinance or any judgment of any court or tribunal like Pakistan LNG judgment of the IHC, the tax expert added.

Another tax expert was of the view that Tax Laws (Amendment) Ordinance, 2025 has been promulgated by the Federal Government in order to expedite recovery of direct taxes where the decisions by the High Courts and Supreme Court are decided against the taxpayer. In this way the federal government has tried to legally deal with the judgment of Islamabad High Court in W.P. No. 2622 of 2022 in the case of Pakistan LNG Limited v. FOP. The FBR was also facing difficulty in recovering of money which was recently decided against a taxpayer from the telecommunication sector.

Recently, in the case of a telecommunication company in Income Tax Reference No. 1 of 2024 on 28-04-2025 was decided against the taxpayer company where the recovery of the principal amount is more than Rs. 5-6 billion. The above decision in the case of Pakistan LNG Limited from Islamabad High Court was also a hurdle in recovery of the said amount from a telecom company.

Tax expert added that after the promulgation of the new Ordinance 2025, the tax department is at liberty to attach the bank accounts immediately upon announcement of judgment of court. According to experts, arming the tax department with such powers is limiting the remedies provided in the law. It is a very extreme coercive amendment in the income tax law which will hamper both local and foreign investment in Pakistan, tax expert added.

Tax Laws (Amendment) Ordinance, 2025 said that notwithstanding anything contained in this Ordinance or any other law or any rule, any decision or judgment of any court, forum or authority, the tax payable under any provision of this Ordinance or any assessment order shall become immediately payable or within the time specified in the notice issued by the income tax authority, irrespective of the time provided under any other provision or the said decision or judgment, in case the issue giving rise to the tax payable is decided by a High Court or Supreme Court of Pakistan.

It further said that notwithstanding anything contained in this Ordinance or any other law or any rule, any decision or judgment of any court, forum or authority, the tax payable under any assessment order shall become immediately recoverable or within the time specified in the notice issued by the income tax authority under this sub-section irrespective of the time provided under any other provision or the said decision or judgment, in case the issue giving rise to the tax payable is decided by a High Court or Supreme Court of Pakistan.

Subject to such conditions and restrictions, as deemed fit to be imposed, the Board or the Chief Commissioner, may post an Officer of Inland Revenue or such other officials with any designation working under the control of the Board or the Chief Commissioner, to the premises of any person or class of such persons, to monitor production, supply of goods or rendering of or providing of services and the stock of goods not sold at any time, Tax Laws (Amendment) Ordinance, 2025 added.

The amendments in the Federal Excise Act, 2005 through Tax Laws (Amendment) Ordinance, 2025 further said that without prejudice to the foregoing provisions of this section, the Board in case of goods subject to monitoring under Section 45A of this Act and counterfeited goods, may authorise any officer or employee of the Federal or Provincial Government to exercise the powers and perform the functions of the Officer of Inland Revenue under Section 26 and sub-section (1) of Section 27, by notification in the official Gazette subject to such conditions, if any, it may deem fit to be imposed, Tax Laws (Amendment) Ordinance, 2025 added.

Referring the amendments made through Tax Laws (Amendment) Ordinance, 2025, another tax lawyer explained amendments made in the Income Tax Ordinance, 2001 and Federal Excise Act, 2005.

1. Income Tax Ordinance, 2001 Amendments:

Section 138 (3A): Tax becomes immediately payable once decided by a High Court or Supreme Court, overriding any timeline given by other laws or judgments.

Section 140 (6A): Tax becomes immediately recoverable in similar circumstances, again notwithstanding any other law or timeline.

Section 175C: Posting of Officer of Inland Revenue: Allows posting of tax officers to business premises to monitor production, supply of goods or services and stock of unsold goods.

2. Federal Excise Act, 2005 Amendments:

Section 26 & 27: Now includes offences for non-affixation or use of counterfeit tax stamps, barcodes, labels; etc., and broadens enforcement scope beyond counterfeiting.

Section 27 (4): Authorises Federal/Provincial Government employees to act as Inland Revenue officers for enforcement regarding goods under monitoring (Section 45A) and counterfeit goods.

When contacted, senior tax lawyer Waheed Shahzad Butt stated that the new amendments introduced through the Tax Laws (Amendment) Ordinance, 2025 have ignited controversy across legal and tax circles, as they grant sweeping powers to tax officers to recover taxes without issuing prior notice to taxpayers.

Under the newly promulgated tax laws ordinance, tax authorities have been empowered to bypass standard procedures and immediately enforce recovery actions, a move that according to critics compromises due process and undermines taxpayer protections.

Butt strongly criticised the government’s decision, stating that instant amendments made by the present Government to amend the tax recovery provisions run counter to the famous Pakistan LNG case — a judgment by Islamabad High Court (IHC) wisely decided to promote the rule of law and protect the taxpayer’s right to fair play and transparency.

Waheed Butt warned that such unchecked powers could erode public trust in the tax system and potentially lead to abuse. This will undermine the neutrality of the taxation system and promote tax robbery moves rather than genuine tax recovery. IHC has earlier ruled that a notice under Section 138 of the Income Tax Ordinance, 2001, is mandatory before initiating any coercive tax recovery action under Section 140. This ruling particularly mandates the issuance of a Section 138(1) notice, granting taxpayers a seven-day period for voluntary payment, before any action under Section 140 is taken. The IHC’s decision emphasises a need for due process and prevents the FBR from resorting to coercive measures without prior notice.

New amendments could open the door to arbitrary enforcement, leaving individuals and businesses vulnerable to unjust recovery actions without recourse or prior knowledge. It is nothing but a regressive shift from established jurisprudence that prioritises procedural fairness and taxpayer safeguards, Waheed added.

New ordinance stated, “Notwithstanding anything contained in this Ordinance or any other law or any rule, and notwithstanding any decision or judgment of any forum, authority or court, the tax payable under any provision of this Ordinance or any assessment order including amended or further order shall become immediately payable or within the time specified in the notice issued by the income tax authority under this sub-section irrespective of the time provided under any other provision or the said decision or judgment, in case the issue giving rise to the tax payable is decided by a High Court or Supreme Court,” it added.

Copyright Business Recorder, 2025