The Federal Board of Revenue (FBR) has twice extended the deadline for filing income tax returns this year from the original Sep 30 to Oct 30, ostensibly to facilitate taxpayers and improve compliance. There is little surprise in this; it has become an annual ritual. In the past, the FBR has continued granting extensions month after month throughout the year.
That the first extension came just hours before the original deadline expired, despite repeated warnings from the Board that no such relief would be offered, is equally unsurprising. In a routine explanation, the FBR said the decision to extend the deadline was made in response to requests from various trade bodies, tax bar associations, and members of the general public.
The extensions are granted in accordance with the Income Tax Ordinance, 2001, which authorises the Board to extend the deadline for filing returns when taxpayers face hardships in meeting the prescribed requirements. This provision ensures that taxpayers are not penalised for delays beyond their control.
However, the matter is not that straightforward. The rationale behind granting extensions is ostensibly to enhance tax compliance by accommodating genuine difficulties. Yet the results consistently prove otherwise. For many observers, this represents a weakening of the FBR’s authority and its ability to enforce compliance. Past experience demonstrates that extensions fail to increase the number of tax filers.
A study finds that when deadlines are extended, individuals delay filing by about 88pc while unincorporated businesses delay by 70pc of the extension period
A study by Muhammad Khudadad Chatta, examining the effects of extending tax filing deadlines in Pakistan, a low-compliance developing country with a narrow tax base, provides empirical evidence of this failure. Using tax return data from 2007–2017 and official records of deadline extensions, the study finds that when deadlines are extended, individuals delay filing by about 88 per cent while unincorporated businesses delay by 70pc of the extension period.
More significantly, extensions actually reduce final compliance rates. The analysis demonstrates that additional time does not motivate more taxpayers to file; rather, these encourage procrastination and undermine compliance. The study concludes that deadline extensions fail to broaden the tax net and instead impose significant costs, such as delayed revenue collection and diminished respect for official deadlines.
FBR Chairman Rashid Langrial, who states that he is personally opposed to extending tax filing deadlines, attributes the need for extensions to taxpayers’ procrastination. “Human beings are slaves of their habits; we only act when the deadline is about to expire,” he remarks. “When everyone starts filing in the last few days, the system inevitably crashes. To prevent this and ensure that everyone gets an equal opportunity to file their returns, we are left with no choice but to grant extensions.”
Procrastination is certainly a factor behind the repeated requests from tax bar associations and trade bodies for more time. However, the FBR is often compelled to grant extensions mainly because of serious technical glitches in its back-end IT systems and the practical difficulties taxpayers encounter in complying with sudden structural and content revisions in the income tax return forms — changes that are frequently introduced during the filing period itself.
Leading tax lawyer Dr Ikramul Haq attributes the FBR’s recurring extensions of the tax filing deadline to the government’s habit of making frequent, sweeping changes to tax laws during the filing period itself. “This does not happen anywhere else in the world,” he observed, noting that other countries maintain stable and easy tax policies that enable taxpayers to file their returns without difficulty.
“The law requires the FBR’s online portal to be ready by July 1, in practice, however, the Iris portal is often unavailable even as the Sept 30 deadline approaches”
“The law requires the FBR’s online portal to be ready by July 1, the start of the new fiscal year. In practice, however, the Iris portal and the updated tax return format are often unavailable even as the Sept 30 deadline approaches,” Dr Haq explained. “This delay undermines public trust in the system and creates serious compliance problems. When everyone rushes to file in the last week or so, the portal crashes under the load of heavy traffic.”
Dr Haq underscored that the wholesale changes introduced by the FBR are possible only because parliament has delegated its legislative powers to the executive. “In which democratic country do parliamentarians hand over their lawmaking powers to the executive? It’s unthinkable,” he remarks, arguing that such abdication reflects lawmakers’ lack of interest in improving the tax system and compliance.
Since the FBR can make whatever changes it deems fit through executive orders, he adds, the tax return format and requirements are altered almost every year, creating compliance challenges. This situation stands in sharp contrast to many other countries where taxpayers receive pre-filled returns that require only review and minor adjustments by them.
Another major issue, he says, is the disconnect between the FBR’s policy, operations, and IT wings. “PRAL [Pakistan Revenue Automation Pvt Ltd], which manages the FBR’s digital systems, also functions independently of the organisation,” he notes. “As a result, there are too many operational bottlenecks and coordination problems in implementing policy decisions.”
He illustrated his point with a recent case involving Mansoor Beg, who complained to the FBR about serious calculation errors in the Iris system. Mr Beg pointed out that the new online tax return format wrongly computed the surcharge on AOP, or association of persons, shares under Section 4AB of the Income Tax Ordinance, 2001. The system, he said, first calculated tax on gross income, allowed a tax credit for AOP, and then separately imposed a 10pc surcharge on the gross income by effectively taxing the AOP share twice.
According to him, the FBR’s system restricted the online return fields, leaving taxpayers no choice but to file returns under the erroneous formula. When the FBR failed to respond, he filed a complaint with the Federal Tax Ombudsman (FTO), arguing that by limiting the return fields, the FBR was denying taxpayers their right to appeal against an unlawful interpretation of the law.
The FBR admitted its omissions during the course of the hearing and said it had prepared a Change Request Form to make the necessary amendment in the Iris system. However, the system is still not functioning properly. The FBR admitted to the error and said it was being corrected.
The FTO directed that the mistake be rectified and a compliance report submitted by October 22. Yet, as of Friday, the error still persisted. The FBR’s Director General (IT) informed the FTO on Thursday that PRAL had yet to fix the issue. “This”, Dr Haq concludes, “shows how dysfunctional and inefficient the country’s tax machinery has become”.
Published in Dawn, The Business and Finance Weekly, October 27th, 2025
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