Islamabad, May 4, 2025 – The Federal Board of Revenue (FBR) has officially begun immediate recovery of outstanding taxes directly from taxpayers’ bank accounts, following the promulgation of the Tax Laws (Amendment) Ordinance, 2025.
This newly enforced legislation marks a significant shift in Pakistan’s tax enforcement landscape by granting sweeping powers to the FBR for immediate recovery without prior notice, once a case is concluded in favor of the tax department by higher courts.
Under the amendments to Sections 138 and 140 of the Income Tax Ordinance, 2001, and changes to the Federal Excise Act, 2005, the FBR is now authorized to initiate immediate recovery actions upon final judgment by the High Court or Supreme Court. This includes freezing bank accounts, attaching movable and immovable properties, and sealing business premises. The FBR no longer needs to serve additional notices before such actions are taken, effectively overriding provisions that previously allowed time for appeals or voluntary compliance.
The ordinance further permits the FBR to depute tax officers to manufacturing and business sites to monitor production, inventory, and supply of goods. Amendments also empower tax officers to act as enforcement agents against non-affixation of tax stamps and counterfeit labeling under Sections 26 and 27 of the Federal Excise Act.
According to senior tax lawyer Waheed Shahzad Butt, these amendments represent an aggressive and coercive shift in tax enforcement. “Empowering the FBR to bypass established procedures and initiate immediate recovery without serving a notice undermines judicial checks and taxpayer protections,” he said. He highlighted how this development contradicts past judgments like the Pakistan LNG case, where the Islamabad High Court emphasized due process, mandating a Section 138 notice before enforcing recovery through Section 140.
The government argues that this legal update aims to address delays in revenue collection and to close loopholes exploited by large corporations, particularly in cases like the recent Rs. 5–6 billion tax dispute involving a telecom company. However, critics warn that the sweeping powers could lead to arbitrary enforcement and scare off investors.
The FBR is now empowered to carry out immediate recovery actions not only against individuals but also corporate entities, as seen in the telecommunication sector ruling dated April 28, 2025. Such cases are now enforceable immediately, irrespective of appeal filings or contrary court decisions, subject to finality of judgment.
Experts caution that while the FBR’s new authority might speed up tax recovery, it could severely impact investor confidence and the integrity of the tax system. By removing procedural safeguards, the ordinance, though intended for immediate recovery, risks being perceived as draconian, triggering backlash from legal, business, and civil rights communities.