The Tax Laws (Amendments) Ordinance, 2025 has introduced several significant changes to the Income Tax Ordinance, 2001 (ITO 2001) and the Federal Excise Act, 2005.
According to tax experts at KPMG Taseer Hadi & Co. Chartered Accountants, commented these amendments focus on enhancing tax recovery mechanisms, expanding enforcement powers, and strengthening compliance monitoring through technological measures.
Judicial Review of Recovery Measures
It is important to note that when provisions are introduced to expedite tax recovery or restrict judicial discretion—particularly concerning the stay of tax demands—they are often subject to judicial scrutiny under Article 199 of the Constitution. Accordingly, the newly inserted provisions may also face legal challenges and require validation by the courts to ensure constitutional compliance.
Income Tax Ordinance, 2001
Enhanced Recovery Procedures
Sections 138 and 140 of the ITO 2001 outline the procedures for recovering taxes. Through the Amendments Ordinance 2025, non-obstante clauses have been inserted in both sections. These changes stipulate that any tax payable—under any provision of the Ordinance or through an assessment order—shall become immediately due, or due within the time specified in the notice issued by the tax authority, regardless of the timeframes provided elsewhere in the law or any stay granted by a court.
This measure is aimed at accelerating tax collection in cases where the Supreme Court or a High Court has ruled against the taxpayer. Authorities may attempt to enforce recovery even where appeals are pending or stay orders exist, potentially raising constitutional and procedural concerns.
Posting of Inland Revenue Officers
A new section, 175C, has been added to empower the Federal Board of Revenue (FBR) and Chief Commissioners to post Inland Revenue Officers or other designated officials to the premises of taxpayers. These officers will monitor production activities, the supply of goods or services, and the stock of unsold goods. This step is intended to strengthen field enforcement and oversight.
Federal Excise Act, 2005
Expanded Power to Seize Goods
Section 26 of the Excise Act previously allowed seizure of counterfeit or untaxed cigarettes, beverages, and other dutiable goods. The new amendments now include goods that lack proper tax stamps, banderoles, stickers, labels, or barcodes—or those bearing counterfeit versions—as also being liable to seizure. This aligns with requirements under Section 45A concerning electronic tracking and monitoring of excisable goods.
Confiscation and Destruction of Non-Compliant Goods
Amendments to Section 27 clarify that goods seized under the revised Section 26 will be subject to confiscation and destruction. The revised provision further authorizes the government to notify officers or employees—federal or provincial—to exercise the powers of Inland Revenue officers under Sections 26 and 27, with conditions specified via official Gazette notification.
These amendments reflect a clear policy direction towards more aggressive enforcement and use of technology in tax administration. However, they also raise important questions regarding constitutional safeguards and procedural fairness, which may be tested in courts over time.