Pakistan PM curbs FBR arrest powers in tax fraud cases after investor pushback

Prime Minister Shehbaz Sharif has accepted investor demands to limit the Federal Board of Revenue's (FBR) arrest powers under Section 37A of the upcoming Finance Bill 2025.

Starting next fiscal year, tax officials will no longer be able to directly arrest CEOs of companies accused of tax fraud. Instead, a three-member board will now decide whether to approve arrests in such cases.

The revised law includes new safeguards. A suspect must be presented before a magistrate within 24 hours of arrest. No arrests will be made in cases involving less than 50 million rupees, though investigations will continue. Arrests may occur if a suspect ignores three official notices, destroys evidence, or attempts to flee abroad.

The prime minister also directed the formation of a special committee to review the scope of the FBR's enforcement powers and propose safeguards to prevent abuse. “Powers should not be used arbitrarily,” Shehbaz said, urging external oversight and third-party evaluations.

The Finance Act 2025 will also introduce explicit clauses to protect taxpayers from misuse of authority. Shehbaz stressed the need for broader consultation with political allies in parliament to build consensus.

During the National Assembly Standing Committee on Finance session, lawmakers shared mixed views. Committee member Omar Ayub Khan said arrests would be limited to businesspersons. Javed Hanif said the FBR’s monitoring was meant to improve tax collection. Sharmila Farooqi warned the FBR risked becoming “another NAB,” referring to Pakistan’s controversial anti-graft body.

Finance Minister Muhammad Aurangzeb urged lawmakers to trust the FBR and the government. He emphasized that future reforms would rely heavily on technology to close the PKR 6000 billion tax gap. A new reward system has also been introduced for honest FBR officers.

FBR Chairman Rashid Langrial stated that only 12 individuals in Pakistan had declared assets worth PKR 10 billion or more. He called for better assessment systems and more compliance from taxpayers.

In a separate development, the committee proposed new property purchase rules for non-filers starting next fiscal year.

Non-filers will be barred from purchasing property. Buyers must declare assets of at least PKR 10 million and update the FBR portal before any property transaction. Buyers can purchase property worth PKR 13 million if their last declaration or income tax return shows assets worth PKR 10 million.

Property purchases will be restricted to one every five years, and limits can be adjusted by the federal government.