Islamabad: The Federal Tax Ombudsman (FTO) has issued a strong reprimand to the Federal Board of Revenue (FBR) over its continued inaction and administrative negligence regarding the taxation of cryptocurrency in Pakistan. In a significant development, the FTO has recommended that the FBR take immediate steps to bring digital asset transactions within the formal tax regime through the upcoming Finance Bill.
The FTO issued these remarks as part of an inquiry that originated from Section 10(1) of the Federal Tax Ombudsman Ordinance 2000 through the complaint of local citizen Hafiz Muhammad Asghar. The complainant demanded cryptocurrency taxation guidelines from the FBR to create standardized rules about digital asset declaration and taxation.
The FTO emphasized that Pakistan ranks as the sixth biggest nation regarding cryptocurrency popularity because its population contains 9 million crypto users. This undeclared sector continues to operate without any taxation rules.
The State Bank of Pakistan issued a 2018 circular about virtual currencies which later received support from the Sindh High Court (SHC) in C.P. No. 7146/2019 concerning cryptocurrency legal status in Pakistan. The complainant demonstrated willingness to pay taxes on his crypto assets while advocating for the government to establish guidelines for taxing earnings from digital currency investments.
Despite multiple hearing notices issued by the FTO Secretariat on February 7, February 20, and March 20, 2025, representatives from the FBR’s Policy Wing failed to attend the proceedings. The Ombudsman dismissed the FTO’s written comments, which maintained that the matter involved policy elements that exceeded their jurisdiction.
According to the FTO’s analysis, the FBR’s approach counted as interpretation errors that meet definitions of maladministration specified in Section 2(3)(ii) of the 2000 FTO Ordinance. The ombudsman affirmed that this matter belongs to tax administrative functions while asserting that FBR’s inaction creates a missed chance to bolster the nation’s tax revenues.
“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 official ruling stated.
The FTO highlighted cryptocurrency’s promise for Pakistan, stating that the country’s crypto market revenue would grow to USD 1.6 billion by 2025 and user adoption would reach 27 million. The Securities and Exchange Commission of Pakistan (SECP), along with other regulatory bodies started initiating investigations into digital asset regulations in 2020.
The findings emphasized that unless the government acts decisively, billions of rupees generated through digital transactions will remain undocumented and untaxed, compounding the country’s existing tax evasion challenges.
In conclusion, the Federal Tax Ombudsman issued a series of formal recommendations to the FBR:
Furthermore, the FTO directed the Member-IR (Policy) to conduct an internal inquiry into the repeated absence of departmental representatives during the hearings and take appropriate action against the responsible officials.
Industry experts and policy analysts view the FTO’s directive as a necessary step toward responsible and revenue-generating crypto regulation in a rapidly digitizing economy. The FBR has yet to issue an official response to the Ombudsman’s recommendations.