Pakistan Senate panel rejects FBR’s bid for arrest powers in tax fraud cases

Pakistan's Senate Standing Committee on Finance and Revenue has rejected a controversial proposal by the tax collection body — the Federal Board of Revenue (FBR) — seeking powers to arrest individuals at the investigation stage in tax fraud cases.

During a committee meeting chaired by Senator Saleem Mandviwalla to review budgetary proposals related to sales tax laws, members voiced strong opposition to allowing FBR officials to detain individuals suspected of tax fraud without prior court approval.

FBR Chairman Rashid Langrial defended the proposal, saying the FBR itself had recommended additional checks on the use of such powers. He disclosed that even influential individuals, including a former senator, had committed tax fraud and that video evidence had been documented.

Langrial also revealed that a former Pakistan Customs official — now in FBR custody — had coached a shoe manufacturer on how to evade sales tax, resulting in the loss of millions of rupees.

Senator Farooq H. Naek responded firmly, asserting that only a court of law has the authority to approve the arrest of someone accused of tax fraud. He drew parallels with the National Accountability Bureau (NAB), which had similar powers curtailed by Parliament. “We cannot allow similar unchecked powers to be handed over to the FBR,” he said.

Senator Abdul Qadir acknowledged that NAB can arrest during investigations, but only with statements from approvers. Langrial argued that tax fraud is a criminal offense and individuals involved in fraud exceeding PKR 1 billion should be subject to arrest. Naek maintained, however, that judicial approval is a constitutional requirement.

Special Assistant to the Prime Minister on Finance and Revenue Bilal Kiyani clarified that the proposed change was aimed at replacing the “draconian powers” currently held by assistant commissioners. Under the proposed framework, arrests would only be permitted with the approval of a commissioner of Inland Revenue rather than lower-tier officials.

The committee advised FBR to revise the proposal in consultation with the attorney general and the finance minister and present updated recommendations.

In related matters, the committee endorsed tougher penalties for tax fraud: five years’ imprisonment for fraud up to PKR 1 billion, and up to 10 years for amounts exceeding that threshold.

The committee also approved a proposal allowing FBR to enforce compliance by freezing bank accounts, sealing business premises, and seizing immovable property of businesses that fail to obtain mandatory sales tax registration.

Chairman Langrial assured lawmakers that no such enforcement action would take place without a public hearing involving tax authorities and representatives from business chambers.