The Federal Tax Ombudsman (FTO) has strongly condemned the Federal Board of Revenue (FBR) for its prolonged inaction and lack of clarity regarding the taxation of cryptocurrency, recommending immediate steps to bring digital asset transactions within the formal tax regime.

The FTO’s observations came in response to a complaint filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000. The complainant, a local cryptocurrency user, urged the FBR to clarify its tax policy concerning the possession and income derived from virtual currencies. He highlighted that over 9 million Pakistanis are active crypto users, placing Pakistan sixth globally in terms of cryptocurrency adoption, yet the sector remains completely undocumented and untaxed.

The complainant referenced the State Bank of Pakistan’s stance, supported by a Sindh High Court judgment (C.P. No. 7146/2019)—that virtual currencies have not been declared illegal. He expressed willingness to pay tax on digital assets and insisted that the FBR develop a framework to legally recognize and tax cryptocurrency holdings and profits.

Despite multiple hearing notices issued on February 7, February 20, and March 20, 2025, the FBR’s Policy Wing failed to attend the proceedings. While the department filed written comments asserting that cryptocurrency taxation is a policy matter outside the FTO’s jurisdiction, the FTO rejected this argument, stating that the issue falls within the purview of maladministration as defined in Section 2(3)(ii) of the FTO Ordinance, 2000.

The FTO observed:
“It is the height of neglect, inattention, and ineptitude on the part of the FBR that, instead of appreciating the initiative to bring this neglected area to the attention of tax authorities, the FTO’s jurisdiction is being challenged on technical grounds.”

The findings stressed that billions in commercial transactions are occurring via cryptocurrency platforms without any documentation or taxation, resulting in a significant loss to national revenue. The FTO emphasized that, at a time when Pakistan is struggling with widespread tax evasion, crypto taxation could offer a vital new revenue stream.

The FTO has recommended that the FBR:

• Take the complainant and all relevant stakeholders on board.
• Develop a clear and comprehensive tax policy on cryptocurrency.
• Ensure the matter is addressed in the upcoming Finance Bill.
• Launch consultations with technical experts and relevant regulatory agencies to streamline this process.

Furthermore, the FTO has directed the Member-IR (Policy) to investigate the absence of the Departmental Representative during the hearings and take appropriate action against the delinquent officer.