FBR Assures Transparency in Tax Fraud Arrests Under Finance Bill

Islamabad-(Mudassar Iqbal)-The Finance Bill 2025 is currently under discussion in the National Assembly and among business circles. However, several digital and print media reports suggest that some proposed amendments have caused confusion and concern among the public.

One such amendment relates to the arrest powers in tax fraud cases. Under existing law—Section 37A of the Sales Tax Act, 1990—arrests can be made following a defined procedure, including immediate intimation to a Special Judge and production of the accused within 24 hours. The proposed amendment, however, introduces stricter safeguards: arrests will now require a prior inquiry and the approval of the Commissioner Inland Revenue (CIR). Based on the inquiry’s findings, the CIR may authorize a formal investigation, granting the investigating officer powers similar to those of a police officer under the Code of Criminal Procedure, 1898.

An arrest can only be made if the investigation officer has reasonable grounds to believe tax fraud has been committed, and only with prior CIR approval.

The new legal provision further provides that if the arrest is mala fide the matter will be referred to the Chief Commissioner for fact finding inquiry. This shows that in contrast to the earlier provision where an Assistant CIR could arrest an offender, the new provisions bring transparency in the process by a mandatory prior inquiry and investigation and finally permission by the CIR.
Moreover, certain changes and amendments are also necessary to reassure the compliant taxpayers that those evading taxes or involved in tax fraud are dealt with by the state with an iron hand.

FBR Chairman Mr. Rashid Mahmood Langrial has expressed his willingness to discuss the recent changes made in the tax laws and introduce changes wherever needed, for example, the provisions related to arrest could be revised to mandate the permission of multiple senior officers before any arrest.

Furthermore, in order to ensure that these powers are not misused by the authorized tax officers against the compliant taxpayers and business community, the Honorable Prime Minister Shehbaz Sharif has formed a high powered committee, which will be headed by Minister for Finance and Revenue, to re-evaluate the proposed amendments and suggest adequate safeguards to prevent potential misuse of powers. The other members of the Committee will include Ministers of Law and Economic Affairs Division, Minister of State for Finance, SAPM Industries and Chairman FBR. The Committee will also examine various options to ensure that legal economic activities are not stifled and propose additional protective measures against unlawful use of authority. The Committee will submit its recommendations to the Honorable Prime Minister in three days.

FBR is committed to safeguard the legal rights of the compliant taxpayers and to increase the tax collection and state revenues by discouraging non-compliant taxpayers and acknowledging those who are paying their due share to the state.