Tax Book 2023

Ethics in Tax Laws Chapter- 02

3. ETHICS FOR TAX ADMINISTRATORS

3.1 Ethics for tax administrators – introduction

Federal Board of Revenue is empowered under the law to monitor, assess, levy, collect taxes

according to the tax legislations. There are a number of occasions whereby they possess any of

the following descretionary powers.

 Asses taxes;

 Collect Revenue;

 Seize Property;

 Attatch Bank A/cs;

 Commence legal (criminal/civil) proceedings against the taxpayer

Such descretionary powers may be misused and can become abusive powers as exercise of

that power can result in the following against the taxpayer:

 Loss of property and income;

 Imprisonment

So, these power can result in the loss of some of the fundamental human rights of the taxpayer.

Ethics tend to bring these powers within the principles of good and morality.

Example:

Mr. Asif is running a textile unit and income tax amounting to Rs. 15 (M) is assessed against

him. His bank accounts balance is Rs. 10M, however, he has to fulfil his exports orders. In

case he fails to fulfil his orders, he will loose his clients and that orders. Moreover, he has to

face SBP penal action for non export. Considering his present critical financial position, Mr.

Asif believes that tax recovery proceedings by recovery from bank account (Attachment of

bank account) will entail to an irreparable loss to his organisation. So he requested to

Commissioner Inland Revenue for allowing him to pay the due tax in instalments.

Now Commissioner Inland Revenue has power to allow him instalments (but to be paid with

default surcharge) or recover this tax directly from his bank account, unless stay order

provided by the taxpayer from the Commissioner Inland Revenue (Appeals) or honourable

High Court. Justice and equity demands that his request should be entertained; if not so then

stay order as discussed shall be in the field. However the allowablility of instalments will result

into for the continuation and prosperity of business that eventually result in payment of better

taxes in future whereas recovery of tax will jeopardise his business operation.

Example:

Income Tax Ordinance, sales Tax law, Federal excise law empower tax authorities to select

cases for Audit under various sections of the respective laws. This power can be misused by

selecting some cases while leaving many unaudited even in the presence of power of

amendment in assessment under section 122 of the Income Tax Ordinance, 2001. Thus,

despite the law provides unfettered powers however, such powers should be exercised on

some ethical and rational basis.

3.2 Pillars of tax administration

In order to safeguard the interest of taxpayers and avoid abuse of powers by he Tax

administration. Following four pillars of Tax administration are defined:

1. Fairness
   Strive to be impartial, fair, neutral and consistent in administering the law without regard to
   race, social or economic circumstance;