Expiry of statutory time limits: ST Department criticised for passing orders
They are of the view that the departmental proceedings after the expiry become invalid because these time limits are mandatory. They asserted that the specific insertion of time periods through statutory amendments showed a clear legislative intent to make these timelines mandatory. The use of 'shall,' they argued, indicated a mandatory requirement, particularly since no such time limit existed prior to 2000, and its later inclusion was deliberate.
The department, on the other hand, believes that the time limits are meant only to ensure speedy proceedings and should not invalidate lawful tax liabilities. Ironically, the department deals with all such time limits as directory, saying that in fiscal laws, especially, such time limits are aimed at efficient and timely tax collection. They contended that the time limits are intended to enforce administrative discipline, not to cancel tax liabilities entirely. According to the departmental sources, the absence of any explicit penalty for missing these deadlines supports their view that the time limits are not mandatory, rather than mandatory.
According to the department, the time limits prescribed for passing orders under sections 11(5), 11G, and the former section 36 of the Sales Tax Act are mandatory or merely directory and the use of the term 'shall' in these provisions does not impose a strict legal obligation to adhere to the specified timelines.
However, the tax circles are of the considered view that the language of sections 11(5), 11G(2), and section 74 suggests that both uses of 'shall' in the provisions are mandatory, especially when combined with the words 'in no case.' They said that reading the timelines as directory would render critical parts of the statute meaningless. Section 74 does not give FBR unlimited power to extend time. Any extension must be based on objective and reasonable grounds to strike a fair balance between administrative discretion and legal certainty, helping prevent delays, abuse of power, and uncertainty in tax matters. Furthermore, they added that the 2024 amendments retaining the same time structure strongly confirmed Super Asia's interpretation.
Copyright Business Recorder, 2025
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Business Recorder
17 hours ago
- Business Recorder
FBR quietly rolls back 0.25% penalty on declared value
LAHORE: The Federal Board of Revenue (FBR) has rolled back penalty of 0.25 percent on the declared value without any official notification under Section 82 of the Customs Act, 1969, said sources. They said the penalty had been rolled back, pending the issuance of a formal notification. It may be noted that the FBR has taken the decision to save customs clearing agents from undue inconvenience despite the absence of any official notification in this regard. The FBR was set to amend the relevant section to reduce port congestion and dwell time by proposing penalties. The proposed amendments had suggested that the owner of the goods shall be liable to such penalties as may be notified by the federal government in the cases where goods declaration is not filed for home-consumption or warehousing or trans-shipment within 10 days of the arrival of goods at a customs station. For the goods declaration filed prior to berthing of the vessel, the goods are not removed from the customs station after payment of leviable duty and taxes, within three days of completion of assessment and berthing of the vessel. In addition, amendments were also proposed in Section 83(1) to explain the clearance through custom computerized systems. For the goods declaration filed after berthing of vessel, the goods are not removed from the customs station for home-consumption or warehousing or trans-shipment within three days of the clearance of the goods declaration. The Association of Customs Agents had proactively raised this issue with the concerned authorities at FBR and Pakistan Customs. Copyright Business Recorder, 2025
Business Recorder
18 hours ago
- Business Recorder
Business community leader assails ‘unpredictable' tax policies'
KARACHI: The Chairman of the National Business Group Pakistan, the President of the Pakistan Businessmen and Intellectuals Forum, the President of the All Karachi Industrial Alliance, the Chairman of the FPCCI Advisory Board, Mian Zahid Hussain has said that the business community is currently upset by unpredictable and inconsistent tax policies, which are discouraging both domestic and foreign investment. If the government truly wants meaningful economic recovery, it must urgently take steps to expand the economic base and tax net, reduce production costs, and ensure that the tax burden is shared fairly among all citizens. Otherwise, the ongoing crisis will only get worse. He stated that the pace of tax reforms is still disappointing. He explained that resistance to the digital economy is adding to the growing tax burden on the poor, making their lives harder. He pointed out that current economic policies are worsening unemployment and poverty nationwide. Mian Zahid Hussain said that strict fiscal and monetary policies have heavily impacted industrial activity, job opportunities, and consumers' purchasing power. According to the World Bank, Pakistan's poverty rate has hit 40.5 percent, with unemployment at around 22 percent, revealing the real challenges behind ongoing reforms. He highlighted that 75 to 80 percent of the Federal Board of Revenue's (FBR) revenue comes from withholding taxes, which are technically indirect taxes. These taxes place a disproportionate burden on salaried and middle-income groups already struggling with inflation, high electricity costs, and rising interest rates. He added that the business and industrial communities harbour strong concerns over the powers granted to FBR officers under the Finance Bill 2025. Mian Zahid Hussain warned that, in pursuit of the Rs 14,300 billion tax target, the government must not jeopardize the country's Rs 123,000 billion economy. Instead, efforts should focus on expanding the overall economic base, which would naturally increase tax revenues. He stressed that genuine tax reform is not about further burdening current taxpayers but about expanding the tax base. Without including the country's large informal economy in the tax system, achieving the 13% tax-to-GDP ratio sustainably is unlikely. For long-term progress, Mian Zahid Hussain stressed the crucial need for transparency, fairness, and accountability to be incorporated into the tax system. Copyright Business Recorder, 2025
Business Recorder
19 hours ago
- Business Recorder
Tax-to-GDP ratio: flawed debate
There has been persistent pressure on successive Pakistani Governments by policymakers, especially those affiliated with multilateral donor agencies, to increase the Percentage Tax-to-GDP ratio. It is true, that the fiscal deficit continues to increase. However, the assumption that it is a tax shortfall that grows the deficit needs to be challenged — Nadeem Ul Haque & Raja Rafi Ullah, The Odd Fascination with Tax-to-GDP Ratio (PIDE Knowledge Brief No. 78:2022) 'If we want lower taxes for growth, then spending must be curtailed so that governments won't need so much money. The next time you hear a politician promise another tax break for some special group of taxpayers, think how much that hurts the economy and you as a taxpayer. It's time to simplify the system and reduce its onerous impact that undermines economic growth' — Jack M. Mintz, the Palmer Chair of Public Policy, School of Public Policy, University of Calgary, Canada The recent claim by the Chairman of Federal Board of Revenue (FBR) that for the recently-ended fiscal year (FY) 2024-25 its tax-to-GDP ratio improved by 1.5 percent needs reconsideration [in FY 2024 FBR's tax-to-GDP ratio was 8.8 percent and not 9.5 percent, which was of total national taxes]. It is well-known that the debate over tax-to-GDP ratio in Pakistan has always been lopsided, failing to take into account the fact that the Pakistani nation remains the most heavily taxed in the entire region. Adding insult to injury, the citizens in return even do not get clean drinking, what to speak of free education, decent healthcare, affordable housing/transport and social protections like universal pension for all, out of taxes paid by the citizens. In federal tax collection by the FBR, there has been an overwhelming reliance on indirect taxation [even under the garb of direct income taxation through presumptive and minimum tax regimes through withholdings on a number of transactions having no nexus with income], without evaluating its impact on the economy and life of the less privileged sections of society. This flawed tax policy has been contributing towards the rich-poor divide as well expanding inequalities in income/wealth distribution. In the face of declining income tax contribution in GDP of less than 3 percent (after excluding indirect ones levied under Income Tax Ordinance, 2001), the finance minister of successive regimes — civil and military alike — and Revenuecracy have been making tall claims about 'impressive' (sic) increase in taxes before the International Monetary Fund (IMF) and elsewhere. The reality of this 'impressive' performance has been exposed in various columns by these scribes. However, the IMF and World Bank in the past kept mum, as they were party to portraying all-good 'projection saga' during the era the Uncle Sam needed Pakistan; first for dismemberment of the then USSR and later for imposing New World Order in the name of 'War on Terror' (sic). Back in 1995, the then Prime Minister, Nawaz Sharif, claimed during a meeting, held in Washington on October 21, 2015, with that time Managing Director of IMF, Ms. Christine Lagarde, 'We have achieved the highest tax-to-GDP ratio and Pakistan's economy has been stabilising due to prudent policies of my government'. This claim was diametrically opposite to what was stated by the then Auditor General of Pakistan (AGP) in his report making 'astonishing disclosure' that the tax-to GDP ratio of FBR 'reached its lowest level on the conclusion of the World Bank funded Tax Administration Reform Project (TARP)'. It was strange that in the presence of report of AGP, our Prime Minister, his finance minister and other 'financial experts' were trying to convince the IMF that 'all is well'. Nawaz Sharif on assuming the power for the third time as prime minister gave unprecedented tax waivers and concessions to the non-filers and tax evaders—even then, his amnesty schemes miserably failed. It could only yield Rs. 1.3 billion! In these columns efforts have been made to explain reasons for the poor tax collection. However, the citizens for the last many decades rightly raise the question, 'Do you know how rulers play havoc with the taxpayers' money'? They insist that we must calculate cost to national exchequer in providing tax-free perquisites and benefits to indomitable militro-judicial-civil-complex and public office holders in the form of palatial residences, army of servants, expensive cars, golf courses, rest houses etc. They call on first ending this colossal wastage of funds and money spent on fruitless foreign tours, state banquets etc. and then debate the issue of low tax-to-GDP ratio. Although in these columns a detailed roadmap for reforming the existing tax system and raising taxes to the level of Rs 30 trillion is presented, the self-styled stalwarts and wizards sitting in Ministry of Finance (MoF) and FBR want 'advice' and 'assistance' from IMF and World Bank despite. Needless to say, they miserably failed in the past to reform tax system. The situation can aptly be described what great Urdu poet Mir Taqi Mir said in the following couplet: Mir kya sada hein beemar howe jis key sabab, usi attar key londey sey dawa letey hein (What a simple soul is Mir; he seeks cure from the healer's boy who is the cause of his ailment). It is tragic that in a country where billions of rupees are made in speculative transactions in real estate and shares, tax-to-GDP ratio has been pathetically low hovering around ten percent for over a decade. Those who matter in the land are least bothered to tax undocumented economy and counter benami transactions. The mighty sections of society are engaged in these transactions and FBR being their handmaid has no intention to tax them. The definition of the term, 'business' given in section 2(10) of the Income Tax Ordinance, 2001, covers 'adventure in the nature of trade'. However, our tax machinery is sitting idle causing enormous loss to the national exchequer by not bringing adventures in the nature of trade (speculative transactions) in real estate and shares into tax ambit. The elected representatives (sic), in fact, clipped the power of FBR to tax speculative transactions in real estate as adventure in the nature of trade by including immoveable property in the definition of 'capital asset' through Finance Act, 2012 with effect from tax years 2013. Earlier, they have been giving undue tax exemptions on gains arising on speculative transactions in shares and stocks. Higher tax-to-GDP ratio in industrialised countries is primarily due to the higher level of revenue from social security, payroll taxes, corporate taxes and taxes on domestic consumption while taxes collected from international trade and non-tax revenue are lower. In contrast, in Pakistan the major portion of revenue comes from indirect taxes, particularly taxes on international trade and domestic consumption, while direct taxes have a pathetic share [4.3 percent of GDP in FY 2024 that included 50 percent pass through withholding taxes]. The extending of extraordinary tax-free benefits to the powerful classes, failure to tap actual tax potential, indulgence in wasteful expenditure and funding of inefficient public sector enterprises are continuously pushing the country to more and more expensive borrowings — both internal and external. The unrelenting huge fiscal deficit and rising quantum of debt are the major source of macro-economic imbalances over the last many years. Making the things worse, the growth-retarding tax policy is playing havoc with stagnant economy. Sole stress on oppressive indirect taxes is not only widening the rich-poor divide, but has also failed to enable Pakistan to reduce even revenue deficit—we are not mobilising enough to meet current expenditure. The question is: where does the fault lies? Even the World Bank-IMF funding and 'guidance' has failed to bring desired results. Who is responsible for the prevailing pathetic state of affairs? Our debt burden has increased monstrously, fiscal deficit is simply unmanageable, inflation is crushing the poor, taxes are evaded and avoided by the rich and whatsoever is collected is wasted by the rich and mighty. What a tragedy that the elites (ashrafiya) not only evade taxes but also thrive at taxpayers' expense. They are the de facto beneficiaries of all the State's resources—generated mainly by the suppressed land-less tillers and diligent industrial workers. Pakistan is not a poor country — the State's kitty is empty because of colossal wastage of taxpayers' money on unproductive expenses (perks and perquisites of ruling elites) and non-exploitation of vital natural resources as well unwillingness of the rich to pay income tax. The absentee landowners (they include mighty generals who have been allotted State lands under one pretext or the other during the last many decades) have been resisting proper personal taxation on their enormous income and wealth. An unholy anti-people trio of indomitable militro-judicial-civil complex, inefficient politicians and greedy businessmen—controlling and enjoying at least 90 percent the State resources—contribute below 1 percent towards national revenue collection but is beneficiary of 90 percent of available national resources. The existing exploitative, rotten, regressive, ill-directed and unfair tax system is rapidly widening the existing divide between the rich and the poor. The lack of political will to tax the rich and the mighty remains our dilemma — not scarcity of resources. Equity demands higher taxes from those who have higher income and wealth, but in Pakistan since the first martial law all fiscal policies have decreased tax burden on the rich and increased its incidence on the poor. Pakistan's tax-to-GDP ratio at FBR level alone can rise to 20 percent, if we bring 5 million ultra-rich into tax net, heavily tax speculative transactions in real estate (it will promote construction industry as prices of land will come down), tax all speculative deals at stock exchanges (it will induce genuine investment in companies, withdraw all tax-free perquisites given to militro-judicial-civil complex and public office holders and confiscate untaxed assts. The existing tax system is highly unjust. It protects the rich and mighty having monopoly over economic resources. The common people are paying an exorbitant sales tax of 18 percent (in fact 35-55 percent on finished imported goods after mandatory value addition and income tax at source) on essential commodities as well as Rs 80 per litre as petroleum and environment levies on petrol/diesel but the mighty sections of society such as big industrialists, landed classes, generals and bureaucrats are paying no wealth tax/income tax on their colossal assets/incomes. Our present tax revenue potential, if monstrous black economy is dealt with iron hand, is not less than Rs 30 trillion provided that the existing tax base is made wider and equitable, black economy is discouraged, tax machinery is completely overhauled and exemptions and concessions available to some privileged sections of society are withdrawn. However, this is not possible without simplification of the tax system [FBR, tax potential & enforcement—I, Business Recorder, March 5, 2021, and FBR, tax potential & enforcement—II, Business Recorder, March 7, 2021]. Copyright Business Recorder, 2025
