Litigation
ISLAMABAD: In a significant push to enhance revenue generation and close existing loopholes in Pakistan’s tax regime, President Asif Ali Zardari has promulgated the Tax Laws (Amendment) Ordinance, 2025, aimed at swiftly recovering tax amounts entangled in litigation.
The ordinance authorizes Inland Revenue Officers to be deployed at business premises to monitor production and collect taxes immediately after court decisions, and also grants provinces the power to seize tax-evaded cigarettes.
This move comes as part of the government’s broader commitment to meet its ambitious revenue target of Rs12,332 billion by June 30, 2025, as agreed with the International Monetary Fund (IMF). To facilitate this, key amendments have been made to the Income Tax Ordinance, 2001:
- Section 138 now includes sub-section 3A, which mandates that any tax payable—once upheld by a high court or the Supreme Court—shall be due immediately, overriding other provisions or legal interpretations.
- Section 140 similarly introduces sub-section 6A, making assessed taxes instantly recoverable upon adjudication by the superior judiciary.
- A new Clause 175C empowers the FBR or chief commissioners to post officers at business locations to monitor the production and sale of goods and services, targeting undocumented sectors.
In a landmark development, the FBR has operationalized Section 175C to bring Pakistan’s vast informal service sector under scrutiny. Previously, enforcement under similar laws primarily targeted goods; now, services like hospitality, medical care, beauty salons, and gyms will face increased oversight. This is vital given that services contribute nearly 60% of the GDP, while over 70% of service-sector enterprises remain unregistered, causing significant tax leakages.
The amendments also include changes to the Federal Excise Act, 2005. Now, products lacking genuine tax stamps, barcodes, or stickers will be classified as contraband. The FBR has been authorized to empower federal or provincial officials to act against counterfeit or unstamped goods, bolstering compliance and enforcement.
In addition to the tax ordinance, President Zardari promulgated three more laws a day before convening the National Assembly. These include:
- Federal Ministers and Ministers of State (Salaries, Allowances and Privileges) Amendment Ordinance, 2025, aligning ministerial salaries with those of National Assembly members effective January 1, 2025.
- CDA Amendment Ordinance, 2025, with details to follow.
- National Agri-Trade and Food Security Authority Ordinance, 2025, which establishes a new authority tasked with setting trade guidelines, ensuring food security standards, and promoting cooperation with provinces. This authority will include a board of governors, a chairperson, and a director general, and will maintain its own advisory committees and laboratory for sample testing.
These ordinances reflect a sweeping reform effort intended to streamline revenue collection, enforce tax compliance, and strengthen institutional frameworks.
