FBR clarifies concerns over tax law amendments

As the Finance Bill 2025 undergoes debate in the National Assembly and within business circles, concerns have emerged regarding certain proposed amendments to tax laws. Several reports in the digital and print media suggest a lack of clarity and public understanding surrounding some key provisions.
A particular point of contention involves the proposed changes to arrest powers under tax fraud investigations. Currently, Section 37A of the Sales Tax Act, 1990 provides legal grounds for arrest in such cases, along with safeguards, such as immediate intimation to a Special Judge and mandatory court appearance within 24 hours.
The proposed amendment, however, introduces stricter procedural checks. It requires a prior inquiry and written approval from the Commissioner Inland Revenue (CIR) before any investigation is initiated. Only after the CIR's authorisation can an investigation officer — vested with the powers of an officer in charge under the Code of Criminal Procedure, 1898 — proceed with an arrest. Even then, the officer must have reasonable grounds to believe that tax fraud has occurred. If an arrest is found to be mala fide, the case will be referred to the Chief Commissioner for a fact-finding inquiry.
These new provisions mark a shift from the previous framework, where an Assistant CIR could authorise arrests. The amendments are being positioned as a move towards greater transparency and procedural fairness.
In a recent press statement, the Federal Board of Revenue (FBR) has maintained that these measures aim to strike a balance — reassuring compliant taxpayers while ensuring that tax evaders face strict legal consequences.

Try Our AI Features

Explore what Daily8 AI can do for you:

Learn with AIFact CheckingText to SpeechAI Summary

Related Articles

Express Tribune

7 hours ago

• Express Tribune

Taxman gets arrest powers

Listen to article A National Assembly panel on Saturday approved special powers for tax authorities to arrest individuals involved in tax fraud, while it deferred the approval of another fiscal law that would have suddenly deprived government entities of their cash surpluses. Meanwhile, teachers and researchers will now be subject to full income tax, as the International Monetary Fund (IMF) did not agree to the government's proposal to extend the 25% income tax rebate for another fiscal year. Federal Board of Revenue (FBR) Chairman Rashid Langrial informed the National Assembly Standing Committee on Finance that the IMF had refused to extend the rebate. The committee, chaired by Syed Naveed Qamar, approved legal powers for the FBR to arrest taxpayers involved in tax fraud without prior court approval. However, additional safeguards were added to limit the discretionary use of these powers. At one point, Qamar remarked that the tax fraud "law has been borrowed from the National Accountability Bureau". The Senate Standing Committee on Finance had already cleared the controversial proposal. Now, following minor amendments by the National Assembly panel, the bill is expected to become law from July 1. Tax fraud has been defined as: "knowingly, intentionally or dishonestly doing any act or abets any action to cause loss of tax under this Act, including: using or preparing false, forged and fictitious documents including return, statements, annexures and invoices; false claim of input tax credit based on fictitious transactions; issuance of any tax invoice without supply of goods; tampering with or destroying of any material evidence or documents required to be maintained; generating fake input through manipulation of return filing system of the Board and making fake entries in the sales tax returns or in the annexures; and making fictitious compliance of section 73, including routing of payments back to the registered person, or for the benefit of the registered person, through a bank account held by a supplier or a purported supplier." Upon committing any of the above offences, the FBR will have the authority to arrest the individual without first seeking a warrant from any court of law. FBR Chairman Rashid Langrial said the criminality of tax fraud has been divided into two parts. In some cases, court permission will be required before an arrest is made. He explained that crimes such as suppression of taxable supplies under the Sales Tax Act, suppression or nonpayment of withholding tax for more than three months, dealing in goods liable to confiscation and making taxable supplies without registration will require court approval for arrest. According to the proposal, an Inland Revenue officer not below the rank of assistant commissioner – or any officer authorised by the board – may initiate an inquiry upon approval from the commissioner, if there is material evidence pointing to the commission of tax fraud or an offence warranting prosecution under the act. The inquiry officer shall have the powers of a civil court under the Code of Civil Procedure, 1908, including summoning and enforcing attendance of any person, examining on oath, requiring discovery and production of documents and receiving evidence on affidavits. The inquiry officer must complete the inquiry within six months. During proceedings, the officer must provide the accused with a chance to be heard and confront them with details of the alleged fraud. A final report will then be submitted to the commissioner, who may either approve a full investigation, request further details, or close the matter. Upon approval, the investigation must be completed within three months. The board may authorise a commissioner — through a three-member committee notified by the chairman — to issue an arrest warrant if the tax loss exceeds Rs50 million. Arrests will only be made if the accused fails to respond to three notices, attempts to flee, or is likely to tamper with evidence. When asked, Langrial said the accused can also be arrested at the airport if there is suspicion of an escape attempt. Cash surplus The standing committee held an extended discussion on a government proposal to assert full rights over the cash surpluses held by state-owned enterprises. The proposed amendment to the Public Finance Management Act aimed to grant the federal government control over these surpluses. "The federal government's budget deficit would never end, and it now wants to bankrupt the public sector companies," Syed Naveed Qamar said. Finance Minister Muhammad Aurangzeb argued that the companies were acting like "states within a state" and were not cooperating. He added that even government-nominated board members were not being heeded, blaming bureaucrats for the lack of progress. Minister of State for Finance Bilal Kayani withdrew the bill from the agenda, saying the government would reintroduce it after incorporating the committee's recommendations to strike a balance between fiscal discipline and autonomy. One major state-owned company was reported to be sitting on a cash surplus of Rs253 billion.

Express Tribune

11 hours ago

• Express Tribune

FBR clarifies concerns over tax law amendments

As the Finance Bill 2025 undergoes debate in the National Assembly and within business circles, concerns have emerged regarding certain proposed amendments to tax laws. Several reports in the digital and print media suggest a lack of clarity and public understanding surrounding some key provisions. A particular point of contention involves the proposed changes to arrest powers under tax fraud investigations. Currently, Section 37A of the Sales Tax Act, 1990 provides legal grounds for arrest in such cases, along with safeguards, such as immediate intimation to a Special Judge and mandatory court appearance within 24 hours. The proposed amendment, however, introduces stricter procedural checks. It requires a prior inquiry and written approval from the Commissioner Inland Revenue (CIR) before any investigation is initiated. Only after the CIR's authorisation can an investigation officer — vested with the powers of an officer in charge under the Code of Criminal Procedure, 1898 — proceed with an arrest. Even then, the officer must have reasonable grounds to believe that tax fraud has occurred. If an arrest is found to be mala fide, the case will be referred to the Chief Commissioner for a fact-finding inquiry. These new provisions mark a shift from the previous framework, where an Assistant CIR could authorise arrests. The amendments are being positioned as a move towards greater transparency and procedural fairness. In a recent press statement, the Federal Board of Revenue (FBR) has maintained that these measures aim to strike a balance — reassuring compliant taxpayers while ensuring that tax evaders face strict legal consequences.

Business Recorder

12 hours ago

• Business Recorder

Proposed sweeping powers for FBR will cripple economy: PBF

LAHORE: Pakistan Business Forum (PBF) has strongly denounced the Federal Budget 2025; calling it a direct assault on the business community and warning that the sweeping powers proposed for the Federal Board of Revenue (FBR) will cripple the economy and trigger widespread unrest if not immediately reversed. Speaking to the media, Muhammad Naseer Malik, Chairman (Central Punjab) of the PBF, said the Finance Bill introduces a range of unprecedented and undemocratic enforcement clauses that violate the principles of fair taxation and due process. He warned that these proposals will create an environment of fear and intimidation, where businesses operate under constant threat of legal action without the protection of proper checks and balances. PBF highlighted specific provisions of the Finance Bill 2025 that it says are particularly damaging to business confidence and fundamental rights: Section 37AA allows for the arrest of individuals without a warrant, solely on the basis of suspicion of tax fraud, paving the way for arbitrary detentions and harassment. Section 14AE empowers FBR officials to seize business premises and property without judicial oversight or meaningful safeguards. The Section 37B authorizes the detention of businesspersons for up to 14 days, with possible extension by a magistrate, even before the conclusion of an investigation. Further, Section 11E permits FBR to make tax assessments and initiate recovery based purely on suspicion, bypassing the need for a complete inquiry or verifiable evidence. Section 33 (13 & 13A) introduces 10-year prison terms and Rs10 million fines for vaguely defined 'tax fraud,' which the PBF warns could criminalize genuine business errors or disputes. Section 32B grants private auditors quasi-legal authority, allowing them to act with powers that blur the line between auditing and prosecution — a move PBF considers both unconstitutional and dangerous. 'These provisions do not promote tax compliance — they institutionalize fear, harassment, and unchecked power,' Malik said. 'They will push the business community to the edge, and many will be forced to shut down operations or move abroad.' The PBF also criticized the existing tax structure, pointing out that the effective tax burden on businesses has soared to between 50% and 60%, the highest in the region. This includes a 25% corporate tax, 25% tax on dividends, super tax, sales tax, withholding taxes, and high import duties. According to the Forum, these combined pressures make investment, expansion, and job creation impossible under the current fiscal regime. In addition to demanding the complete withdrawal of the above clauses, the PBF is calling for a reduction in interest rates to 6% to support business recovery and economic growth. The Forum believes that a more balanced tax policy - coupled with targeted reforms and incentives - could double public spending on education and health without suffocating the productive economy. Naseer Malik also warned if the Finance Bill 2025 is passed in its current form, Pakistan's economy will face irreversible damage. If the government thinks it can collect taxes without taxpayers, it is free to try. And if the FBR believes it can run an economy without businesses, let it go ahead; the consequences will be clear soon enough.' Copyright Business Recorder, 2025