Punishments for individuals committing tax fraud to be reviewed, says finance minister

Finance Minister Muhammad Aurangzeb stated that the government would review the punishments, including penalties, arrest, and imprisonment, for individuals committing tax fraud under the Finance Bill 2025-26. 

He assured the Senate Standing Committee on Finance that the committee’s recommendations would be shared with the prime minister for further consideration.

During the meeting, the committee, led by Senator Saleem Mandviwalla, discussed revisions to Sections 37A and 37AA of the bill, which pertain to the powers of inquiry and investigation, as well as arrest powers for tax fraud. 

Senator Farooq H Naek proposed amendments to these sections, including reducing the proposed 10-year prison sentence for tax fraud to five years and cutting the fine from Rs 10 million to Rs 5 million.

The committee also suggested that tax fraud should be considered a bailable offense under the Sales Tax Act. Members emphasized that the focus should remain on recovering taxes from taxpayers, with a two-year sentence seen as more appropriate for tax fraud offenses.

Senator Naek also proposed legal refinements such as requiring three separate notices before prosecution, mandating High Courts to decide tax appeals within 60 days, and separating the inquiry, investigation, and court trial phases. He stressed that penalties should be proportionate to the offense and not used for political victimization.

The committee rejected the proposal to collect 100% of the tax loss and default surcharge penalty from those already arrested for tax fraud. Under the original proposal, individuals convicted of tax fraud could face up to 10 years in prison, a fine of up to Rs 10 million, or both, in addition to paying the equivalent amount of tax loss and penalties.

The committee expressed appreciation for Senator Naek’s input, which guided the discussions and helped refine the legal language of the bill.