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ISLAMABAD: The Federal Tax Ombudsman (FTO) has strongly condemned the Federal Board of Revenue (FBR) for its prolonged inaction and lack of clarity regarding the taxation of crypto currency, recommending immediate steps to bring digital asset transactions within the formal tax regime in FY26 Finance Bill.
In the next Finance Bill, the FBR should develop a clear and comprehensive tax policy on crypto currency, the FTO recommended FBR.
The FTO is shocked to hear the FBR’s Policy Wing response that, “the concept of crypto currency is novel and will require expert opinion. The contents of complaint are under consideration and will be responded in due course of time after consulting the concerned agency.”
The FTO’s observations came in response to a complaint filed under Section 10(1) of the Federal Tax Ombudsman Ordinance, 2000. The complainant, a local crypto currency user, urged FBR to clarify its tax policy concerning the possession and income derived from virtual currencies. He highlighted that over 9 million Pakistanis are active crypto users, placing Pakistan 6th globally in terms of crypto currency adoption, yet the sector remains completely undocumented and untaxed.
The complainant referenced the State Bank of Pakistan’s stance—supported by a Sindh High Court judgment (C.P. No. 7146/2019)—that virtual currencies have not been declared illegal. He expressed willingness to pay tax on digital assets and insisted that FBR develop a framework to legally recognize and tax crypto currency holdings and profits.
Despite multiple hearing notices issued on February 7, February 20, and March 20, 2025, the FBR’s Policy Wing failed to attend the proceedings. While the department filed written comments asserting that crypto currency taxation is a policy matter outside FTO’s jurisdiction, the FTO rejected this argument, stating that the issue falls within the purview of maladministration as defined in Section 2(3)(ii) of the FTO Ordinance, 2000.
The FTO observed: “It is the height of neglect, inattention, and ineptitude on the part of FBR that, instead of appreciating the initiative to bring this neglected area to the attention of tax authorities, the FTO’s jurisdiction is being challenged on technical grounds.”
The findings stressed that billions in commercial transactions are occurring via crypto currency platforms without any documentation or taxation, a significant loss to national revenue. The FTO emphasized that, in a time when Pakistan is struggling with widespread tax evasion, crypto taxation could offer a vital new revenue stream.
The FTO has recommended that FBR to take the complainant and all relevant stakeholders on board.
The FBR should develop a clear and comprehensive tax policy on crypto currency.
The FBR should ensure the matter is addressed in the upcoming Finance Bill.
The FBR should launch consultations with technical experts and relevant regulatory agencies to streamline this process.
Furthermore, the FTO has directed the Member-IR (Policy) to investigate the absence of the Departmental Representative during the hearings and take appropriate action against the delinquent officer.
This development marks a significant step toward formalizing the crypto economy in Pakistan and may pave the way for responsible, regulated, and revenue-generating use of digital currencies.
Copyright Business Recorder, 2025
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