Karachi, April 9, 2025 – The Karachi Chamber of Commerce and Industry (KCCI) has raised concerns regarding the Federal Board of Revenue (FBR) practices related to the freezing of bank accounts for the recovery of unpaid taxes.
In its tax proposals for the budget 2025-26, the KCCI emphasized the need for fair and transparent practices to ensure that taxpayers’ rights are protected while facilitating the timely recovery of taxes.
According to Rule 72(1) of the Sales Tax Rules and Section 48 of the Sales Tax Act, Inland Revenue Officers are authorized to seal business premises and attach bank accounts as part of the tax recovery process. Similarly, Section 137 of the Income Tax Ordinance requires payment of outstanding taxes within 30 days of receiving a notice from the Commissioner. While these provisions are meant to ensure compliance, the Karachi Chamber pointed out that FBR officials have been using these provisions to directly freeze taxpayers’ bank accounts without prior notice, creating significant disruptions for businesses.
The Karachi Chamber explained that this practice often leads to confusion as taxpayers are not informed in advance about the freezing of their accounts, limiting their ability to contest the decision or clarify misunderstandings. This lack of formal communication not only disrupts business operations but also discourages voluntary tax compliance.
To address these concerns, the Karachi Chamber proposed two key reforms:
1. Temporary Freeze on Bank Accounts: The Chamber recommended that FBR temporarily freeze taxpayers’ bank accounts for 30 days, allowing no withdrawals within this period. This freeze would provide taxpayers enough time to explain any non-payment or resolve disputes if there are misunderstandings regarding the tax liabilities.
2. Formal Notification from Banks: The Chamber also urged FBR to require banks to formally notify taxpayers before their accounts are frozen. Such a measure would ensure transparency in the process and allow taxpayers to act promptly to resolve the issue.
By implementing these changes, the Karachi Chamber believes that FBR can improve the tax collection process while fostering a fairer and more transparent environment for businesses in Karachi and across Pakistan.