Pakistan empowers tax authority to freeze bank accounts of sales tax evaders

In a decisive move, the Pakistan government has empowered the tax collection body — the Federal Board of Revenue (FBR) — with sweeping new authority to target unregistered sales tax evaders by freezing their bank accounts under the amended Finance Bill 2025–26.

Beginning July 1, individuals and businesses operating outside the sales tax framework risk temporary suspension of their financial access.

The newly added Section 14AC grants the FBR the power to instruct banks and financial institutions to freeze the accounts of unregistered entities engaged in the taxable supply of goods. This action can be taken if the commissioner reasonably suspects non-compliance with sales tax registration requirements.

However, enforcement will come with fair warning. Suspected evaders will be given three chances to register voluntarily. If they fail to do so, the commissioner may issue a written directive to freeze their bank account for three working days. This measure can be repeated twice more, with a one-week interval between each suspension, to intensify pressure on defaulters.

This reform aims to close persistent tax loopholes and bring thousands of informal traders into the formal tax net, an area where previous enforcement efforts fell short due to lack of effective financial controls.