PTBP Web Desk
The salaried class in Pakistan is currently grappling with what many are calling an egregious overstep by the Federal Board of Revenue (FBR). Reports have emerged that various field formations of the FBR, including Large Taxpayer Offices (LTOs) and Regional Tax Offices (RTOs), have begun issuing frivolous tax recovery notices to salaried individuals. This move appears to be driven by an urgent need to meet monthly revenue targets, regardless of the legality or fairness of such actions.
The situation escalated when salaried individuals started receiving show-cause notices under Section 162 of the Income Tax Ordinance, alleging excess claims or deductions of tax on salary under Section 149. These notices demand that employees provide copies of computerized payment receipts (CPRs) that their employers have supposedly submitted to banks, with an astonishingly short compliance period. For example, one notice issued on January 28, 2025, demanded compliance by January 31, 2025, leaving individuals with merely two days to respond.
This practice is not only impractical but also legally questionable. Tax experts like Dr. Ikramul Haq have labeled these notices as “patently unlawful” and an abuse of legislative power. According to Dr. Haq, once a tax return is filed and constitutes an assessment under Section 120 of the Income Tax Ordinance 2001, it grants a vested right to the taxpayer. This assessment can only be challenged through an audit under Section 177 or by a notice under Section 122(5A) by an Additional Commissioner, not through arbitrary recovery notices under Section 162 after an assessment has been completed.
The notices essentially bypass the legal framework where, under Section 161, if there’s an issue with the employer’s tax deductions, the FBR should address the withholding agent (the employer) directly. Only after failing to recover from the employer should an employee be approached under Section 162. However, the current notices directly target employees, which, according to experts, contravenes the law.
Shahid Jami, a tax lawyer, pointed out another anomaly where taxes might be deducted but not deposited in the government treasury, yet employees are still held accountable. This scenario further complicates the legal standing of these recovery notices, highlighting a systemic lack of accountability for employers.
Moreover, Waheed Shahzad Butt, another tax lawyer, criticized the FBR’s strategy as perplexing and harassing. He argued that instead of ensuring employers meet their obligations, the FBR is unjustly burdening salaried individuals. This not only reflects a misunderstanding of tax mechanisms but also erodes trust in the tax administration system, pushing compliant taxpayers towards frustration and mistrust.
The implications of these actions are profound. They not only cause undue stress to individuals who are already contributing significantly to the national revenue but also tarnish the reputation of the FBR. These practices could lead to a broader questioning of the integrity of tax collection methods in Pakistan, potentially affecting future compliance and cooperation from taxpayers.
The call from experts and affected individuals is clear: FBR needs to reassess its approach, ensure notices are legally sound, and direct their enforcement actions towards those actually responsible for tax deductions – the employers. The current method of operation risks alienating the very backbone of tax revenue in the country, the salaried class, whose compliance is crucial for economic stability.
