Karachi Tax Bar urges halt to Super Tax recoveries pending detailed court ruling

The Karachi Tax Bar Association has urged tax authorities to suspend ongoing recovery proceedings related to Super Tax liabilities until a detailed judgment is issued by the Federal Constitutional Court.

In a statement addressing the Federal Board of Revenue, the association said its members had reported “vigorous” recovery and collection efforts under Sections 4B and 4C of the Income Tax Ordinance, 2001, following the court’s short order dated Jan. 27.

The KTBA said that while the court disposed of multiple appeals challenging the imposition of Super Tax, the outstanding balances “ought to be pursued for recovery only after the detailed judgment is pronounced.”

“Connected and consequential matters can only be properly adjudicated and evaluated thereafter,” the association said, requesting that recovery proceedings be restrained until the detailed ruling is issued.

The group also expressed concern that in certain cases, recovery actions were being initiated without providing the mandatory 30-day notice period under Section 137 of the ordinance.

“Such actions undermine the statutory framework and contravene binding judicial precedents,” the association said, urging authorities to ensure strict compliance with legal provisions and to halt any premature recovery measures.

The KTBA further said its members were troubled that despite intensified recovery efforts, taxpayers were being denied lawful adjustment of Super Tax liabilities against excess tax payments and pending refund claims filed with field formations.

The association called on the board to direct that recovery be undertaken only after due adjustment of excess payments and refunds, and that verification and processing of refund claims be expedited without undue delay.

It added that recovery proceedings should begin only after the expiry of the mandatory statutory period and in strict compliance with Sections 138 and 140 of the ordinance, read with Chapter XVI-A of the Income Tax Rules, 2002.

The KTBA also noted that some taxpayers intend to admit their Super Tax liability by filing revised income tax returns along with adjustment claims. It asked authorities to issue instructions facilitating acceptance of such revisions “to ensure procedural ease and taxpayer convenience”.

In addition, the association welcomed media reports suggesting that the board plans to allow payment of outstanding Super Tax liabilities in installments.

“This progressive initiative is highly commendable and would provide crucial liquidity relief to affected taxpayers,” the association said, adding that it looks forward to formal communication of the policy and implementation guidelines.

According to sources the Federal Board of Revenue (FBR) is preparing to recover between PKR 150 billion and PKR 200 billion in Super Tax collections during the January-March quarter, following the Federal Constitutional Court’s verdict upholding the levy.

Officials said the International Monetary Fund (IMF) has already been informed that Super Tax recoveries of up to PKR 200 billion are expected after the court decision. While outstanding Super Tax liabilities are estimated at around PKR 300 billion, recoverable amounts are projected to remain within the PKR 150-200 billion range during the current quarter.

Super Tax is levied on high-profit entities at progressive rates ranging from 1% to 10%, depending on annual earnings. Companies with profits between PKR 150 million and PKR 200 million are taxed at 1%, rising incrementally to 10% for profits above PKR 500 million. The tax primarily applies to large corporations, banks and other highly profitable sectors.