ISLAMABAD: The Pakistan Business Council has called on the Federal Board of Revenue to immediately withdraw what it termed “illegal” recovery notices issued to companies for default surcharge on super tax.
In a formal communication to the FBR chairman, the business body said the recent issuance of such notices has created serious concern within the corporate sector, warning that the move appears inconsistent with established legal principles and could negatively impact business confidence and economic activity in Pakistan.
The Pakistan Business Council argued that no default had occurred, as companies had not paid super tax earlier in compliance with court directives. Since the obligation to pay remained suspended under judicial orders, the fundamental condition required to impose a default surcharge—failure to pay within the prescribed time—was never triggered.
It also highlighted the issue of long-pending tax refunds, noting that large amounts of sales tax and income tax refunds have remained unpaid for years without compensation. Imposing surcharge while such refunds remain unsettled, it said, creates an unfair imbalance and risks undermining trust in the tax system.
The business group warned that sudden recovery notices in a legally uncertain environment could damage investor sentiment, stressing that businesses require clarity and predictability to plan operations and investments effectively.
The Pakistan Business Council has urged the Federal Board of Revenue to withdraw the notices and address outstanding refund issues alongside compliance measures to maintain confidence in the tax administration.
Tax experts also questioned the legal basis of the surcharge, stating that under Section 205 of the Income Tax Ordinance, 2001, default surcharge can only be applied when there is an enforceable obligation to pay tax. They argued that during the period of interim judicial relief, such obligation remained suspended, meaning the essential condition for surcharge was not met.
Experts further noted that in several cases, tax liability itself was disputed and backed by court proceedings, including judgments of the Sindh High Court and Islamabad High Court. In such circumstances, they said, tax demands are treated as suspended, making the imposition of surcharge legally untenable.
They added that even if any liability were to arise, surcharge could only be calculated from the date of the Federal Constitutional Court ruling on January 27, 2026, and not retrospectively.
Citing past rulings, including a decision of the Lahore High Court, experts maintained that no surcharge can be imposed where taxpayers acted on a bona fide interpretation of law supported by judicial pronouncements.
They emphasized that principles established by superior courts are binding on all authorities under the Constitution and must be followed, concluding that the current surcharge proceedings lack lawful authority and should be withdrawn.
