Karachi, May 4, 2025 – The Karachi Tax Bar Association (KTBA) has put forward a detailed proposal for the Federal Board of Revenue (FBR) to adopt a comprehensive and transparent audit plan aimed at improving tax compliance and restoring taxpayer confidence.
In its formal recommendations for the Federal Budget 2025–26, the KTBA has emphasized the need to reform the existing mechanism under Section 177 of the Income Tax Ordinance, 2001. According to the association, the current audit framework is widely seen as inconsistent, overly discretionary, and often burdensome for compliant taxpayers. The KTBA believes that an improved and systematic audit regime will not only enhance efficiency but also help reduce harassment and promote voluntary tax compliance.
As part of its proposals, the KTBA has recommended the creation of a dedicated audit wing within the FBR, equipped with modern tools and technologies to identify cases for audit using objective, risk-based criteria. This wing should be responsible for selecting taxpayers based on specific indicators of non-compliance, rather than on arbitrary or subjective grounds.
To make the audit process more effective and comprehensive, the KTBA has advocated for the integration of income tax, sales tax, and federal excise duty (FED) audits into a single, unified process. Such combined audits would give tax authorities a more complete view of a taxpayer’s financial operations and reduce duplication of effort. Moreover, it would lower compliance costs and prevent repeated interactions with taxpayers for separate tax categories.
KTBA’s plan also stresses the importance of judicially guided audit practices. Audits should be conducted in a structured manner, consistent with court decisions, to ensure fairness and legal conformity. Post-audit, a clear and concise report should be submitted to the jurisdictional officer, who would then initiate any necessary assessment proceedings.
The KTBA’s proposal aims to modernize Pakistan’s tax enforcement system, align it with international best practices, and foster a culture of compliance through trust, transparency, and reduced administrative burden. By introducing a structured and fair audit strategy, the FBR can boost its credibility and improve tax collection without alienating taxpayers.