Lahore, September 8, 2025 – A storm is brewing in Pakistan’s tax landscape as the Lahore Tax Bar Association (LTBA) has raised the red flag over critical glitches in the Federal Board of Revenue’s (FBR) online return filing system, IRIS.
What should have been a smooth digital process for tax year 2025 has turned into a nightmare of technical breakdowns, erroneous computations, and widespread taxpayer frustration.
In a strongly worded letter to the FBR chairman, LTBA President Muhammad Asif Rana detailed how persistent faults in the IRIS portal are crippling the filing process. According to the association, the ongoing issues are not minor bugs—they are systematic failures that could derail compliance, disrupt revenue collection, and shake public trust in the tax administration.
Widespread Technical Failures
The association has documented a series of alarming technical errors. Among the most glaring issues is the system’s inability to correctly allocate tax withheld under Section 235 of the Income Tax Ordinance, 2001, particularly in the case of Associations of Persons (AOPs).
Equally problematic is the discriminatory treatment of imports versus exports. While Section 148 allows taxpayers to edit income related to imports, no such option exists under Section 154 for exports. This inconsistency, the LTBA warned, is creating chaos in income attribution and reconciliation for businesses heavily reliant on cross-border trade.
Even when taxpayers manage to fill in their data accurately, the system often throws back unexplained error messages during final submission. Without guidance on what went wrong, many taxpayers find themselves stuck in an endless cycle of trial and error.
Perhaps the most damaging flaw is the system’s tendency to miscalculate final liabilities. By incorrectly adjusting advance tax or tax deducted at source, IRIS sometimes inflates tax demands, leaving honest taxpayers facing demands far higher than their actual liabilities.
Legal Misapplications Causing Chaos
The LTBA has also pointed out glaring legal misapplications within the system. For example, Section 92 of the Income Tax Ordinance exempts share income from an AOP in the hands of members who have no other income sources. Despite this, the IRIS system applies tax on such income and even adds tax credit adjustments that the law never intended.
This unlawful treatment forces taxpayers to pay additional tax under Section 4AB, even when no liability legally exists. In cases where incomes cross Rs. 10 million, the miscalculation becomes even more severe.
Furthermore, the system is failing to distinguish between fixed, final, and minimum tax regimes. Instead of offsetting excess payments or recognizing minimum tax rules, IRIS indiscriminately counts all collections and deductions as liability. The LTBA warned that this flaw alone could lead to widespread disputes, inflated demands, and loss of confidence in FBR’s digital infrastructure.
Shortened Filing Period Adds Pressure
The association also reminded FBR of its delay in notifying the return format for 2025. Under Section 118 of the Ordinance, taxpayers are granted 92 days to file returns after the close of the financial year. However, the FBR issued the return forms only on August 18, effectively consuming 49 days of this statutory period.
“Not only are taxpayers left with fewer days to file their returns, but those remaining days are being wasted fighting with a dysfunctional system,” the LTBA noted. “This is nothing short of a systemic failure that risks delaying revenue inflows for the national exchequer.”
Urgent Demands from the Legal Fraternity
In its communication, the association laid out a series of urgent demands for the tax authority. These include:
• Immediate resolution of technical glitches and miscalculations in the IRIS system.
• Clear guidance through official circulars and FAQs on how taxpayers should address common portal errors.
• Extension of the return filing deadline if system failures persist.
• Establishment of a specialized technical support desk to provide real-time assistance.
Growing Frustration Among Taxpayers
The grievances voiced by the LTBA echo the experiences of thousands of individuals and businesses currently struggling to file returns. Many report hours of wasted effort, repeated system crashes, and the fear of legal consequences if deadlines are missed. For a government keen on digitization, the situation paints a damaging picture of inefficiency and poor planning.
The Bigger Picture
This crisis comes at a time when Pakistan’s economy desperately needs enhanced revenue collection and compliance. A dysfunctional digital system not only hampers tax collection but also undermines the broader narrative of reform and modernization.
If the IRIS glitches are not urgently fixed, experts warn that the government risks losing both tax revenue and taxpayer confidence—a double blow the economy can ill afford.
For now, the ball is in FBR’s court. Tax practitioners, businesses, and ordinary citizens are anxiously waiting to see whether the authority will respond with decisive action—or let this digital storm spiral into a full-blown tax crisis.