The federal government decided to limit the proposed powers of the Federal Board of Revenue (FBR) for arresting company executives after the intervention by Prime Minister Shehbaz Sharif in response to concerns raised by the public and the business community over the proposal allowing junior tax officers to arrest business executives for tax fraud without a warrant.
According to reports, Prime Minister Sharif established a committee on Monday to review the matter and suggest stronger safeguards to prevent misuse of powers by tax officers.
In the Finance Bill introduced last week, the FBR proposed amendments to the Sales Tax Act of 1990, granting tax officers the authority to investigate tax fraud and make arrests. Under the proposed changes, assistant or deputy commissioners would be able to arrest tax defaulters, but only with prior approval from the commissioner.
The prime minister also instructed that consultations with all allied parties in parliament be conducted on the matter. For the arrest of CEOs, CFOs, and board members, six conditions must be met: (1) the individual is attempting to flee, (2) there is an attempt to tamper with evidence, (3) three summonses were issued but the individual failed to appear, (4) a specific tax fraud threshold is reached, (5) the tax fraud amounts to Rs 50 million for the arrest of executives, and (6) the arrest is approved by a special FBR board, including a representative from the Chamber of Commerce.
The PM also directed the establishment of an effective external review system and checks and balances regarding arrests. He emphasized that provisions to protect against the misuse of these laws should be included in the Finance Act.
On the other hand, FBR Chairman Rashid Langrial said that revisions could be made to require approval from multiple senior officers before any arrest is made. He outlined additional safeguards, stating that an individual could only be arrested if they attempted to flee the country, tampered with evidence, or failed to appear before the FBR after three notices.
Earlier, the business community expressed serious concerns over the potential abuse of power due to the proposed provision. Pakistan Business Council CEO Ehsan Malik, in a letter to Finance Minister Muhammad Aurangzeb, described the powers as “draconian,” warning that they could be “misused to harass” taxpayers.
However, the FBR chairman said that the authority to arrest would remain in place, but arrests would be made only with prior approval. “A committee, led by the finance minister, will review the issue and explore additional safeguards to prevent misuse of this power,” he added.
Langrial explained that current laws allow low-ranking officers to file FIRs against tax defaulters, but the proposed amendments would require prior approval from the income tax commissioner before an arrest can be made.
