Senate panel asks FBR to establish slabs for allowing arrests on tax frauds

ISLAMABAD: The Senate Standing Committee on Finance has asked the Federal Bureau of Revenue (FBR) to define a threshold and establish slabs for allowing arrests on tax frauds and imprisonment of up to ten years under the proposed Finance Bill 2025-26.

The FBR has proposed drastic powers, including the sealing of business premises, the seizure of movable property, or the appointment of a receiver for the management of the taxable activity of persons who fail to register themselves. 

It also proposes to bar operations of bank accounts and transfers for immovable property owners who prefer not to get registered for the sales tax.

On the threshold of tax frauds, the FBR proposed that there should be a limit of Rs10 million maximum for allowing arrest. Without taking stern actions, FBR Chairman Rashid Mehmood Langrial stated that tax fraud cannot be tolerated at all. 

Senator Anusha Rahman stated that e-commerce was brought into the tax net and proposed that the FBR differentiate for low-income and poor segments of society.

A heated debate occurred among senators and FBR high-ups over whether the arrest in tax fraud to be allowed during the inquiry or after completion of the investigation. Senator Farooq H Naek from the PPP stated that the arrest could only be allowed by the FBR after permission from the judge.

The Senate Standing Committee on Finance and Revenues continued to scrutinise the Finance Bill 2025-26 for finalising its recommendations. After getting assent of the Upper House of Parliament, the recommendation will be forwarded to the National Assembly. It is yet to be seen how many substantial recommendations of the Senate are going to be made part of the Finance Bill to convert into an Act.

Senator Farooq H Naek argued that the NAB law was amended because earlier, the arrest was allowed during the inquiry, and now the FBR was proposing sweeping powers.

FBR Chairman Rashid Mehmood Langrial strongly defended the proposed changes in the Finance Bill and stated that if anyone stole a motorcycle, it becomes a cognizable offense, but the Parliamentary Committee was asked not to arrest anyone involved in tax fraud worth billions of rupees.

Minister of State for Finance Bilal Azhar Kiyani stated that they were improving the procedures of allowing arrest in tax frauds under the proposed bill and explained that in the existing provision of Sales Tax under 37 A to prosecute and arrest whereby Assistant Commissioner IR who, based on material evidence has reason to believe that any person has committed a tax fraud or any offense warranting prosecution may cause arrest of such person, but now under the proposed bill the Assistant Commissioner would have to seek permission of Commissioner to initiate an inquiry. He was of the view that the proposed bill placed safeguards to restrict the powers of the FBR.

At one point in time, the FBR chairman stated if the parliamentary panel was not fine with the proposed safeguards, they would be fine with the existing powers.

The senators were offended because of removing the restriction of Rs1 billion for arresting in tax frauds. The committee proposed that there should be a threshold for allowing arrest. Shibli Faraz, the opposition leader of PTI in the Senate, opposed the FBR move for drastic powers.

The FBR proposed 5-year imprisonment for tax frauds up to Rs1 billion and more than Rs1 billion it should be 10 years but nothing could be finalised.

Originally published in The News