The Multan Tax Bar Association (MTBA) has asked Prime Minister Shehbaz Sharif to direct the Federal Board of Revenue (FBR) to ensure that raids, inspections and other enforcement actions are not conducted simply to meet monthly, quarterly or annual tax collection targets.
In a letter to the prime minister, the MTBA expressed concern over what it described as an increase in visits, inspections, raids and searches by FBR field formations near the end of revenue periods.
The association clarified that it was not questioning the lawful exercise of FBR’s statutory powers in genuine cases involving tax evasion or noncompliance.
However, the MTBA alleged that such powers were sometimes being used to obtain immediate tax payments for meeting collection targets. It referred specifically to enforcement provisions under Sections 38 and 40 of the Sales Tax Act, 1990, and Section 175 of the Income Tax Ordinance, 2001.
The tax bar said it had received representations from taxpayers and its members regarding alleged pressure on some businesses to make immediate payments that may not have been legally due at the time. It also claimed that certain taxpayers had been asked to account for future sales in the current tax period or arrange advance tax payments to help meet revenue targets.
According to the association, if established, such practices could transform enforcement powers intended to investigate tax violations into tools for generating revenue during closing periods.
The MTBA said inspection, search and examination powers can have significant consequences for businesses and should therefore be exercised based on relevant facts and within the limits prescribed by law.
It argued that the timing of enforcement proceedings should depend on the circumstances of each case and applicable legal requirements rather than the approaching end of a tax collection period.
The association also warned that target based enforcement could undermine taxpayer confidence in the tax administration and put additional pressure on business liquidity and working capital.
The MTBA has asked the prime minister to instruct the Finance Ministry and FBR to prevent enforcement proceedings from being initiated or intensified solely for achieving revenue targets.
It proposed that enforcement cases be taken through the proper legal process, including examination of relevant material, proceedings under the law and, where required, issuance of show cause notices followed by orders after taxpayers are given an opportunity to be heard.
The tax bar also called for scrutiny of so-called voluntary payments made during or shortly after raids, inspections or searches. It said such payments should only be treated as voluntary where they are made without threats, pressure or undue influence.
The association proposed a supervisory mechanism to review unusual collections recorded immediately after enforcement actions during the closing days of a quarter.
The MTBA further called for accountability in cases where enforcement powers are found to have been misused, while reiterating that it supports FBR action against tax evasion and the collection of all taxes lawfully payable to the state.
