A fresh controversy has emerged around Pakistan’s tax administration after reports surfaced that the Federal Board of Revenue (FBR) has classified manual income tax return filers for Tax Year 2024 as “inactive taxpayers.” The move has drawn strong criticism from tax experts, lawyers, and rights advocates, who argue that it directly violates existing legal directives.
What’s the Issue?
Thousands of taxpayers who submitted their income tax returns manually—rather than through the online system—have reportedly found their “active taxpayer” status blocked in FBR records. This classification has serious consequences, as inactive taxpayers are subjected to higher withholding taxes, restricted refunds, and reputational issues when dealing with banks and other institutions.
The problem, experts say, is not just administrative—it is legal.
Conflict with Official Directives
According to tax professionals, FBR’s action contradicts binding instructions issued by the Federal Tax Ombudsman (FTO) as well as FBR Circular No. 6 of 2025–26. The circular explicitly acknowledged that manual tax returns are legally valid and extended the filing deadline for such returns until November 30, 2025, under Section 214A of the Income Tax Ordinance.
More importantly, the circular directed FBR field offices to facilitate manual filers, including providing free legal and technical assistance, even through designated lawyers. Despite these clear instructions, affected taxpayers claim they were instead penalized.
Strong Reaction from Legal Community
Tax lawyer Waheed Shahzad Butt has publicly criticized the FBR’s conduct, describing it as intentional and unlawful rather than a technical oversight. According to him, the continued denial of active status—despite repeated representations—shows a troubling disregard for statutory obligations and taxpayer rights.
Legal experts argue that ignoring FTO directions is not a minor issue. Since FTO rulings are binding on tax authorities, failure to comply could amount to institutional non-compliance and may expose the department to further legal challenges.
Impact on Taxpayers
For compliant taxpayers, the situation is deeply frustrating. Many followed lawful procedures, submitted returns within the permitted framework, and still found themselves treated as defaulters. This not only undermines confidence in the tax system but also discourages voluntary compliance—something Pakistan’s revenue structure can ill afford.
A Broader Governance Question
Beyond individual cases, the issue raises broader concerns about oversight, accountability, and consistency in tax enforcement. Critics argue that when official circulars and ombudsman directives are ignored at the operational level, it weakens the rule of law and creates uncertainty for citizens trying to comply.
What Happens Next?
The controversy has renewed calls for stronger monitoring of FBR practices, clearer internal accountability, and immediate restoration of active status for affected taxpayers. Legal experts also suggest that continued inaction could lead to litigation or further intervention by oversight bodies.
For now, the episode serves as a reminder that tax reform is not just about digitization or revenue targets, but also about respecting legal processes and protecting taxpayer rights.