Red tape undermining FBR reforms, says PTBA

KARACHI: The Pakistan Tax Bar Association (PTBA) has said that red tape is undermining the government’s efforts to reform the Federal Board of Revenue (FBR) and digitise its operations aimed at protecting tax revenue, expanding the tax base and easing difficulties for compliant taxpayers.

“We have received representations from our member bars indicating that red tape exists at various levels,” the PTBA said in a letter to the FBR chairperson on Wednesday. “Although some measures have been introduced through the Finance Act, 2024 to address taxpayers’ hardships, they have instead led to stagnation in business activity and contradict the government’s claims of providing a business-friendly environment.”

The association highlighted instances where pre-suspension notices were issued by tax officers. When taxpayers approach authorities with documentary evidence supporting their input tax claims, officers reportedly demand payment without conducting proper verification. Failure to pay results in suspension of the taxpayer’s sales tax registration.

“This directly contradicts the government’s stated commitment to creating a business-friendly environment. Therefore, directions should be issued that in any proceedings involving disallowance of input tax, action should only be taken after due verification under Section 11. Only if the taxpayer fails to justify the input tax claim should registration be suspended, as per the Supreme Court’s ruling in the case of Commissioner Inland Revenue, Lahore vs Eagle Cable Private Limited, Lahore (CPLA 2400-L/2022),” the PTBA demanded.

It also noted that although amendments to Section 21(5) of the Sales Tax Act, 1990, now allow representation before the chief commissioners against suspension of sales tax registration, these offices are reportedly failing to address the appeals within a reasonable timeframe, leading to a complete halt in taxpayers’ business activities.

The PTBA recommended that such representations be filed via the Iris portal to ensure transparency, with clear documentation of the suspension reasons and outcomes to help the FBR identify and resolve delays and hardships.

The PTBA raised concerns from its member bars in smaller cities regarding the transition from manual to electronic filing of appeals before the Commissioner Inland Revenue (CIR) Appeals. Taxpayers now face several issues, including the need to submit physical files on the hearing date. Moreover, in video link hearings, commissioners are often unavailable, and hearings are conducted by unauthorised staff or inspectors. The association suggested that in the interest of natural justice and fairness, it should be mandatory for the CIR Appeals to personally conduct online hearings.