Tax officers to be stationed at business premises

• PM says ongoing reforms aimed at reducing burden on the common man
• Chambers, traders’ bodies slam govt for not taking them on board

ISLAMABAD: In what appears to be a major step to broaden the country’s narrow tax base, the government has authorised the stationing of tax officers at business premises to monitor production, stocks, supply of goods and rendering of services in the largely undocumented service sector.

On Monday, Prime Minister Shehbaz Sharif was briefed about three major amendments which address urgent legal, administrative and enforcement gaps in the tax system. These amendments were implemented through the Tax Laws (Amendment) Ordinance, 2025.

The amendment pertains to the posting of FBR officers at business premises under Section 175C and is intended to help monitor the revenue collection of high-end services and sectors operating outside the scope of the existing sales tax regime.

This section will not cover traders who are already regulated under section 40B of the Sales Tax Act 1990.

This step simply brings services into parity and ensures fair and comprehensive oversight across sectors, tackling an underground economy that is estimated to be more than 30pc of the GDP.

The measure is a response to the growing tax fatigue among the salaried class and documented manufacturers. Through enhanced documentation of the high-potential service sector, the FBR aims to create a fiscal space that could allow potential downward revisions in personal income tax rates on salaried individuals.

The service sector, which represents nearly 60pc of GDP, remains largely undocumented as over 70pc of enterprises are reportedly unregistered.

The scope of this section specifically targets high-earning yet under-documented businesses. Prominent among these are restaurants, hotels, guest houses, marriage halls, clubs, courier and cargo services, beauty parlours, clinics, hospitals, diagnostic laboratories, gyms, foreign exchange dealers and photographers.

Some private hospitals are reportedly charging Rs100,000 to 200,000 per day for inpatient room occupancy — rates that exceed even those of five-star hotels. Many of these entities are underreporting revenues and do not comply with tax laws, undermining public trust and depriving the state of critical revenue needed for social services and infrastructure building.

This amendment introduces a monitoring mechanism, subject to inter-agency oversight, ensuring that FBR officers cannot act without accountability or beyond the authorised scope. All operations under this provision will be conducted transparently, under strictly defined SOPs, and in coordination with other regulatory authorities to prevent overreach or harassment.

PM’s observations

PM Shehbaz says ongoing tax reforms are aimed at reducing the burden on the common man. He said the amendments in various provisions of the Income Tax Ordinance and the Federal Excise Act will remove obstacles in tax collection.

According to a statement by the Prime Minister’s Secretariat, the amendments will make the tax payment system more convenient and will not affect the rights of individuals and companies who regularly pay taxes.

The premier directed the authorities to expedite measures against tax evasion, under-invoicing and other irregularities in different sectors on priority basis.

He also directed strict legal action against buying and selling of illicit cigarettes and other items.

The meeting was briefed about steps taken against tax evasion in tobacco, cement, poultry, sugar, beverages and other industries. The prime minister was informed that work was underway on digital monitoring and the track and trace system.

The FBR has been successful in identifying irregularities in many industries through video monitoring. The meeting was told that powers to seize illicit products have also been transferred to provinces.

Tax amendments

The first amendment relates to Sections 138(3A) and 140(6A), concerning the immediate payment of tax demand even if a stay is granted or an appeal is pending. Following the recent constitutional amendment, special benches have been established in the superior judiciary to fast-track such cases under the oversight of the Chief Justice of Pakistan. Although the courts are now resolving cases promptly, a lacuna in the law previously allowed taxpayers a 30-day delay in making payments on confirmed demands — even when the matter had been conclusively decided by a court.

As a result, billions in confirmed revenue remained unrealised despite clear court verdicts. The amendment through Sections 138(3A) and 140(6A) seeks to curtail this delay and allow for swift implementation of final judgements issued by the Supreme Court and High Courts.

It is categorically clarified that this provision does not apply to orders passed by lower appellate forums such as commissioners, commissioner of appeals, or Inland Revenue Appellate Tribunals.

It is strictly limited to cases where the highest courts have already adjudicated on the matter and no stay is available. This provision does not overrule any stay granted by the Supreme Court or a high court. On the contrary, it reinforces the tax recovery order adjudicated by the Supreme Court or a high court.

The second amendment addresses the visits of FBR officers to private sector industries not currently accountable to FBR. The visits of FBR officers and officials to business premises engaged in taxable activities — whether earning taxable income or supplying taxable goods and services — are strictly regulated through a series of rules and STGOs. All such visits must be authorised through a bar-coded letter and officials are required to record proceedings on a mobile device for transparency.

Officers are provided with standardized pro forma documents, which are completed during the visit and submitted both electronically via a mobile application and in hard copy to a chief commissioner or to the FBR headquarters.

The conduct of these officers is closely monitored by civil intelligence agencies, and any instance of misconduct — whether reported by intelligence or private businesses — is promptly investigated and addressed.

KCCI, LCCI criticise move

The chief of the Karachi Chambers of Commerce and Industry opposed the insertion of Sections 138(3A) and 140(6A) in the Income Tax Ordinance because these provisions “override judgments of superior courts”.

Mohammad Jawed Bilwani said the business community was worried because the new law would make disputed tax liabilities immediately recoverable even where relief was granted by judicial forums.

Mian Abuzar Shad, who heads the Lahore Chambers of Commerce and Industry, said in a statement that the business community “rejects the controversial amendments” as no stakeholders were consulted.

“These amendments are dangerous and anti-business. Therefore, we unanimously demand their immediate withdrawal or parliamentary review through proper consultation,” Mr Shad said.

Published in Dawn, May 6th, 2025