Pakistan’s tax system has hit a major snag as the Federal Board of Revenue (FBR) recently marked thousands of taxpayers who submitted their manual income tax returns as “inactive”, denying them the benefits of being on the Active Taxpayer List (ATL). This move has sparked confusion, frustration, and criticism from tax experts and filers alike.
Under Pakistan’s tax rules, a taxpayer normally earns active status by filing an income tax return on time or by applying for an approved extension. Active filers enjoy lower withholding tax rates on key transactions such as property transfers and bank transactions, along with easier access to loans and financial services.
But the latest development has left many who filed manual returns for Tax Year 2024 in limbo. The FBR refused to grant these taxpayers active status, citing its efforts to fully digitalize tax filing. Experts say the agency has effectively imposed penalties on people compliant with the law. Many taxpayers had applied for filing extensions before deadlines, but the FBR allegedly declared them inactive regardless.
Critics argue that this contradicts formal directions and existing tax circulars. For example, FBR Circular No. 6 of 2025-26 had expressly extended the deadline for manual filers to November 30, 2025 and required field offices to provide legal and technical assistance. A prominent tax lawyer called the recent actions “deliberate and contemptuous,” saying officials ignored clear legal instructions and even the orders of the Federal Tax Ombudsman (FTO).
In response to public pressure and confusion, the FBR clarified that taxpayers who submitted extension applications within the prescribed time will not lose active status, and that manual filing will be phased out in favor of digital e-filing. Special facilitation cells have been set up in tax offices across the country to help taxpayers transition to e-filing smoothly.
Still, many in Pakistan’s business community believe the row highlights deeper problems in the tax administration — from inconsistent communication to delayed system updates. The debate has reignited calls for clearer rules, better digital tools, and stronger safeguards for taxpayer rights.
