Karachi, April 24, 2026 – The Karachi Tax Bar Association (KTBA) has strongly defended high-income taxpayers against default surcharge proceedings initiated by the Federal Board of Revenue (FBR), raising concerns over legality, fairness, and economic impact.
In a formal letter addressed to FBR Chairman Rashid Mahmood Langrial, KTBA President Muhammad Mehmood Bikiya outlined key grievances regarding the imposition of default surcharge under Section 205 of the Income Tax Ordinance, 2001, linked to the payment of Super Tax.
The association emphasized that while taxpayers acknowledge their legal obligation to pay taxes, enforcement actions must strictly adhere to the law. The controversy stems from the Super Tax introduced around four years ago, where litigation by high earners delayed payments, contributing to a significant revenue gap for the government.
According to KTBA, taxpayers have now fully paid the principal amount of the Super Tax following directives from the Federal Constitutional Court. However, despite compliance, FBR field formations have initiated default surcharge proceedings, citing delays in payment timelines.
KTBA argued that many of these delays occurred due to valid legal reasons, including stay orders, court rulings, and appellate relief granted by competent judicial forums. These legal protections, the association noted, justified the timing of tax payments and should exempt taxpayers from penalty charges.
A major concern highlighted by KTBA is the inconsistency in tax administration. On one hand, taxpayers are being penalized through surcharge orders, while on the other, their legitimate tax refunds remain pending. The association stressed that imposing additional financial burdens without adjusting outstanding refunds violates principles of fairness and equity.
From a legal standpoint, KTBA referenced a significant ruling by the Sindh High Court dated December 22, 2022, which declared the Super Tax for Tax Year 2022 unconstitutional. This judgment remained binding under Article 201 of the Constitution until the matter was finally decided by the Federal Constitutional Court on January 27, 2026.
During this period, the ruling was consistently upheld in appellate proceedings, including cases before the Commissioner Inland Revenue (Appeals) and the Appellate Tribunal Inland Revenue. Additionally, taxpayers relied on directives from the Islamabad High Court regarding the application of Super Tax under the Final Tax Regime.
KTBA stressed that respecting judicial decisions—whether interim or final—is a cornerstone of constitutional governance. Penalizing taxpayers who acted in accordance with such rulings undermines the rule of law and damages trust in the tax system.
The association also warned of broader economic consequences. High-income taxpayers, who contribute significantly to national revenue, are now facing increased financial pressure due to surcharge proceedings and delayed refunds. KTBA cautioned that such measures could discourage compliance and negatively impact the overall economic environment.
In its recommendations, KTBA urged the FBR to immediately review and withdraw default surcharge proceedings in cases involving judicial relief, stay orders, or refundable tax credits. It also called for expedited processing of pending tax refunds to restore confidence and ensure a fair tax regime.
The issue highlights growing tensions between taxpayers and authorities, as stakeholders push for a more transparent, equitable, and legally consistent taxation system in Pakistan.