KARACHI – The Pakistan Business Council (PBC) has urged the Federal Board of Revenue (FBR) to withdraw what it described as “illegal” notices for the recovery of default surcharge on super tax, warning that the move could undermine business confidence and economic stability.
In a communication addressed to the FBR chairman, the business lobby said tax authorities had recently begun issuing notices for recovery of default surcharge on super tax from the corporate sector. It argued that the action was inconsistent with legal and judicial developments and risked creating uncertainty for taxpayers.
The PBC said the imposition of surcharge was not justified as companies had not failed to pay super tax within prescribed timelines due to ongoing litigation and interim relief granted by courts.
“No failure in payment exists where tax obligations were subject to judicial orders,” the council said, adding that the legal precondition for applying default surcharge under Section 205 of the Income Tax Ordinance, 2001 had not been met.
The council also highlighted long-standing delays in income tax and sales tax refunds, arguing that the government had not provided compensation on pending amounts. It warned that imposing surcharge while refunds remained unpaid could create an inequitable tax environment.
“This risks creating a ‘heads I win, tails you lose’ situation, which undermines trust in the tax system,” the PBC said.
The business body further cautioned that sudden recovery notices could damage investor sentiment and disrupt economic planning at a time when businesses already face macroeconomic pressures.
“Businesses require certainty and clarity to plan operations and investments,” it added.
The PBC has requested the FBR to immediately withdraw surcharge notices and simultaneously address pending refund claims to restore confidence in the tax administration system.
When contacted, tax experts told Business Recorder that default surcharge under Section 205 applies only when there is a legally enforceable obligation and a proven failure to pay. They argued that in cases where payment obligations were suspended due to court orders, the condition of default was not triggered.
Experts also noted that in several cases, taxpayers had either provided “good for payment” securities or were covered under judicial protections, meaning liability was not crystallised at the relevant time.
They further argued that where tax positions were taken based on bona fide interpretations supported by court rulings, additional charges such as default surcharge could not be imposed retrospectively.
They added that constitutional and higher court judgments remain binding on tax authorities and must be followed by subordinate bodies, reinforcing the view that current proceedings may lack legal basis.