ISLAMABAD: The Federal Board of Revenue (FBR) has revealed a major tax fraud scandal involving several influential individuals, including a former senator and an ex-customs official. This revelation has intensified the debate surrounding the FBR’s proposed powers of arrest in the Finance Bill, 2025, which seeks to allow arrests after an inquiry is completed.
During a heated session of the Senate Standing Committee on Finance, FBR Chairman Rashid Mehmood Langrial vehemently defended the necessity of these proposed arrest powers. He argued that large-scale tax fraud constitutes a grave criminal offense that demands stringent legal action.
High-profile involvement in tax evasion exposed
Langrial disclosed that a former customs officer, currently in FBR custody, had confessed to guiding a shoe manufacturer on how to evade millions in sales tax. The FBR claims to possess video evidence documenting this elaborate scheme. The Chairman underscored that such criminal acts warrant immediate consequences, noting that one of the key culprits is a high-profile figure who previously served as a senator.
Currently, existing law permits FBR officers to arrest suspects during the inquiry phase. However, the proposed amendment in Clause 37A aims to shift this authority to the investigation stage and introduce a crucial requirement for the Commissioner’s approval. State Minister for Finance Bilal Azhar Kiyani supported this amendment, asserting it would ensure procedural fairness and mitigate the possibility of arbitrary arrests by junior officers.
Senate Committee rejects proposal, demands judicial oversight
The Senate Committee, chaired by Senator Saleem Mandviwalla, firmly rejected the FBR’s proposal in its present form. Senators demanded the establishment of a well-defined threshold for arrests in tax fraud cases. The FBR, in response, proposed a minimum fraud amount of Rs 10 million for an arrest to be permissible.
Senator Farooq H. Naek of the PPP strongly opposed granting such extensive powers to the FBR, advocating that arrests in tax fraud cases should only proceed with judicial authorization. He drew parallels between the FBR’s sweeping proposed powers and past amendments to NAB laws, which critics argued were overly broad and intrusive.
Despite the legislative pushback, Chairman Langrial remained resolute, insisting that tax fraud amounting to Rs 1 billion or more must be met with robust enforcement, including potential imprisonment for up to 10 years. He highlighted the perceived inconsistency of imposing severe penalties for minor crimes while hesitating on major economic offenses.
Proposed penalties & further enforcement measures
The Finance Bill also proposes harsh penalties for severe tax fraud, including 100% fines and up to 10 years’ imprisonment. Furthermore, special judges are proposed to be empowered for the prosecution of these cases.
In addition to arrest powers, the FBR has put forth other enforcement measures, such as sealing business premises, freezing bank accounts, and restricting property transfers for unregistered taxpayers. However, Langrial provided assurances that no punitive action would be taken without a public hearing and consultation with relevant business chambers, aiming to address concerns about arbitrary actions.
In conclusion, the Senate committee has advised the FBR to reconsider its proposals. They have been urged to conduct further consultations with the Attorney General and the Finance Minister before presenting revised suggestions to the committee.
