The Federal Board of Revenue (FBR) has granted Inland Revenue (IR) officers the explicit authority to arrest directors, chief executive officers (CEOs), chief financial officers (CFOs), and individuals suspected of abetting tax fraud, according to the provisions outlined in the Finance Bill for the fiscal year 2025-26.
Under the new rules, an IR officer conducting an investigation may arrest a person involved in tax fraud or any related offence if they have evidence to substantiate the claim. However, the officer must obtain prior approval from the Commissioner before making an arrest.Â
In cases where delays in obtaining approval might allow the suspect to evade justice, an officer may proceed with the arrest without prior approval but must immediately report the arrest to the Commissioner, along with a summary of the grounds for the arrest.
If the Commissioner believes the arrest was made without sufficient evidence or reasonable cause, or if it was made with malintent, they can order the immediate release of the arrested individual. The matter will then be referred to the Chief Commissioner for further inquiry.
The new provisions also extend to companies, where directors, CEOs, CFOs, or any other senior executives believed to be responsible for the company’s tax fraud can be arrested. However, the company itself remains liable for the unpaid taxes, penalties, and default surcharges, even if an individual is arrested.
All arrests under this new rule will follow the relevant procedures outlined in the Code of Criminal Procedure, 1898, unless otherwise stated in the Finance Bill. The Finance Bill also specifies that officers of the Inland Revenue, not below the rank of Assistant Commissioner, can arrest individuals involved in tax fraud or related offences, subject to approval from the Commissioner for investigation and arrest.
