Government seeks stricter recovery measures for unpaid petroleum and climate support levies through tax authorities under Budget 2026-27.
The federal government has proposed a new and more structured recovery framework for unpaid Petroleum Levy and Climate Support Levy through the Finance Bill 2026, presented as part of the Pakistan Budget 2026-27.
The proposed amendment aims to strengthen the collection process and improve enforcement against defaulting entities.
According to an analysis of the budget measures by A.F. Ferguson & Co, the government plans to replace the existing mechanism under which unpaid levies were recovered as arrears of land revenue.
The current provision is proposed to be removed and replaced with a dedicated recovery system specifically designed for Petroleum Levy and Climate Support Levy dues.
Under the proposed framework, if the levies or any related surcharges remain unpaid for a period of 90 days, the concerned department will be empowered to initiate recovery proceedings.
Authorities may either undertake the recovery process independently or request the Commissioner Inland Revenue to recover the outstanding amounts using the same procedures applicable to income tax arrears.
The Finance Bill also seeks to impose stricter limitations on relief available to defaulters. The Commissioner Inland Revenue will not be authorized to grant extensions for payment of outstanding levies, nor will taxpayers be allowed to settle the dues through installment plans. This restriction will also apply to any late payment surcharge associated with the outstanding amount.
To ensure greater accountability, the proposed legislation requires the Commissioner Inland Revenue to submit progress reports every two weeks to the relevant Finance and Petroleum Divisions.
These reports must include details of recovery efforts as well as explanations for any delays or failures in recovering the outstanding amounts.
Another significant feature of the proposal is that procedural irregularities during recovery proceedings would not be challengeable before any tribunal or court.
This provision is intended to prevent recovery actions from being delayed through litigation based on technical grounds.
Furthermore, the proposed amendment will have retrospective effect. Any unpaid Petroleum Levy, Climate Support Levy, or related surcharge that arose before the enactment of the Finance Act 2026 will also be recoverable under the new mechanism, enabling authorities to pursue long-standing outstanding liabilities.
