The Senate Standing Committee on Finance and Revenue has rejected a controversial proposal by the Federal Board of Revenue (FBR) seeking powers to arrest individuals at the investigation stage in sales tax fraud cases.
The committee, which met under chair of Senator Saleem Mandviwalla to review budgetary proposals related to sales tax laws, strongly opposed the FBR’s proposal to allow tax officials to arrest person involved in tax fruad without court approval.
The current law permits FBR officials to make arrests during the inquiry stage. However, the FBR proposed in the Finance bill that tax officials can arrest the individuals involved in tax fruad at the investigation stage after completing inquiry.
FBR Chairman Rashid Langrial told the committee that the FBR itself has recommended stronger checks on these powers. He revealed that influential individuals, including a former senator, have also committed tax fraud, and we have documented video proofs.
He further revealed that a former Pakistan Customs official, now Fbr custody, had advised a shoe manufacturer on how to commit sales tax fraud, resulting in the evasion of millions of rupees.
Senator Farooq H. Naek said only a court of law can authorize the arrest of a person accused of tax fraud. Parliament has already curtailed the unchecked arrest powers previously held by NAB.
We can not allow similar powers to be handed over to the FBR, he added.
Senator Abdul Qadir noted that while the National Accountability Bureau (NAB) does arrest individuals during the investigation stage, with available statements from approvers.
Chairman FBR argued that tax fraud is a criminal offence and that individuals involved in fraud of PKR 1 billion or more deserve arrest. However, Naek maintained that any such arrest must be approved by a court.
Special Assistant to the Prime Minister on Finance and Revenue, Bilal kiyani, said the proposed amendment was intended to replace the “draconian powers” currently held by Assistant Commissioners under existing law. He clarified that under the new framework, arrests would only occur with the approval of the Commissioner of Inland Revenue rather than lower-level officers.
The committee advised the FBR to revisit the proposal in consultation with the Attorney General and the Finance Minister and return with revised suggestions.
In related decisions, the committee recommended stricter punishments, for five years jail up to PKR 1 billion tax fraud and for frauds above PKR 1 billion, the punishment would increase to ten years in jail.
The committee also approved a proposal allowing the FBR to take enforcement actions — including freezing bank accounts, sealing business premises, and seizing immovable property — against those who fail to obtain mandatory sales tax registration.
FBR Chairman assured the panel that no sealing or seizure action would be taken without first holding a public hearing, involving tax officials and representatives from business chambers.
