By Staff Reporter
ISLAMABAD: The government is rethinking sweeping new powers that would allow tax officers to arrest suspected tax evaders, responding to an outcry from businesses and lawmakers who fear the measures could lead to harassment and abuse.
The shift comes days after the government introduced the Finance Bill last week, proposing amendments to the Sales Tax Act, 1990. Under the new Section 37AA, Federal Board of Revenue (FBR) officers, including assistant and deputy commissioners, would gain authority to investigate tax fraud and detain defaulters with a commissioner’s approval if they had “reason to believe” fraud had occurred.
“The officer of Inland Revenue, during the investigation, having reason to believe on the basis of evidence that actions of any person may have caused or attempted to cause tax fraud or any other offence warranting prosecution under this Act, may cause arrest of such person with prior approval of the Commissioner,” the provision stated.
The proposal sparked immediate alarm in the business community.
Pakistan Business Council Chief Executive Officer Ehsan Malik, in a letter to Finance Minister Muhammad Aurangzeb, didn’t mince words. “These measures are draconian in nature and will most likely be misused to harass taxpayers,” he wrote, voicing concerns echoed across the private sector.
The backlash prompted Prime Minister Shehbaz Sharif to intervene, convening a committee on Monday to overhaul the plan and embed protections against overreach.
Sharif, chairing a meeting to review FBR performance, doubled down on safeguarding taxpayers. “Respect and dignity of the business community and investors is of utmost importance to us, and any unjustified harassment is intolerable,” his office quoted him as saying in a statement.
He directed that arrests under tax laws be limited to “defaulters of an extraordinary scale” and called for “an effective system of external review and checks and balances” to oversee enforcement.
Sharif ordered these safeguards woven into the Finance Act to ensure accountability. “Arrests should only proceed in cases where the fraud is exceptionally high,” he said, urging consultations with coalition partners in parliament to secure broad support.
FBR Chairman Mahmood Langrial briefed Sharif that the authority to arrest tax defaulters has been part of taxation law since the 1990s, with low-ranking officers historically empowered to lodge FIRs against defaulters.
However, recent court rulings have prompted amendments to streamline and clarify the provisions. The proposed changes in the Finance Bill already require prior approval from the commissioner, but further safeguards are being considered to curb potential misuse.
Langrial said that while the authority to arrest would remain intact, revisions are under consideration. “The provisions could be revised to mandate the permission of multiple senior officers before any arrest,” he added.
The committee, headed by the finance minister, is exploring options such as requiring approval from three senior officers instead of just the commissioner.
Langrial said the powers would be limited to specific circumstances: when a tax defaulter fails to appear before authorities thrice, when there’s a risk of evidence tampering, or when the suspect might flee the country.
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