Govt introduces safeguards for arrest and penalty in tax fraud cases following Senate panel concerns

Finance Minister Muhammad Aurangzeb presented revised procedures for penalties, arrest, and imprisonment for individuals involved in tax fraud, incorporating new safeguards to prevent the Federal Board of Revenue (FBR) from misusing its powers. These changes were introduced following concerns from the business community and are aimed at ensuring that arrest powers are not misused by tax officials.

During the fifth consecutive session of the Senate Standing Committee on Finance and Revenue, chaired by Senator Saleem Mandviwalla, Aurangzeb revealed that Prime Minister Shehbaz Sharif had directed the inclusion of four major safeguards. These safeguards are designed to limit the misuse of arrest powers by FBR officials in tax fraud cases.

Aurangzeb stated that an individual would only be arrested for tax fraud if there is a risk of escape, but this would require approval from three senior FBR members in grade 21. 

Additional conditions for arrest would include tampering with evidence, committing tax fraud amounting to Rs50 million, or failing to respond to three notices issued by the FBR.

The committee also reviewed several critical policy matters and proposed recommendations. Notably, it recommended the approval and collection of the Goods and Services Tax (GST) in the erstwhile FATA/PATA areas. 

Additionally, the committee objected to the discriminatory nature of sales tax exemptions given only to PIA, urging that these exemptions should apply to all leased aircraft.

The committee also discussed proposed pension increases for retired government employees, with a recommendation to extend family pension durations. The committee further considered measures to address tax fraud in the iron scrap trade. From the next fiscal year, iron scrap importers will be required to sell exclusively to registered manufacturers, aimed at curbing manipulation and misuse of invoices.

Senator Mandviwalla praised the participation and engagement of Senate members in the budget discussions, emphasizing that the process reflects public interest and transparency. The committee’s discussions highlighted the need for a more balanced and equitable tax structure for all sectors.