FBR Clarifies Finance Bill 2025 Discussions and Tax Fraud Arrest Procedures

The Federal Board of Revenue (FBR) announced on Friday that the Finance Bill 2025 remains under deliberation within the National Assembly and among various commercial sectors.

This announcement from the FBR is in response to several reports in both digital and print media that suggest a lack of public understanding regarding certain amendments proposed in the finance bill.

The tax authority clarified that legal provisions concerning the apprehension of individuals implicated in tax fraud already exist under Section 37A of the Sales Tax Act, 1990. These provisions include a detailed protocol to be observed post-arrest, which mandates immediate notification to the Special Judge and the presentation of the accused before the Special Judge within a 24-hour period.

According to the FBR, the proposed amendment aims to limit the arresting powers of officers, necessitating a preliminary inquiry approved by the Commissioner Inland Revenue (CIR). An investigation, granting the investigating officer the powers of a police station in-charge under the Code of Criminal Procedure, 1898 (Act V of 1898), will only be authorized based on the inquiry’s findings.

The statement further noted that an arrest can only proceed with CIR’s prior consent if the investigating officer possesses valid reasons to suspect tax fraud.

The tax authority also mentioned that the new legal provision dictates that any instance of mala fide arrest will be subjected to a fact-finding inquiry by the Chief Commissioner.

The FBR emphasized that the updated provisions enhance transparency compared to the previous system where an Assistant CIR could make arrests independently. The new rules introduce a mandatory preliminary inquiry, investigation, and final authorization from the CIR.

The FBR added that these modifications and amendments are essential to assure compliant taxpayers that the government is committed to rigorously addressing tax evasion and fraud.

FBR Chairman Rashid Mahmood Langrial has stated his openness to discussing the recent tax law changes and making necessary revisions. For example, the arrest-related provisions could be modified to require approval from multiple senior officers before any arrest is made.

To prevent misuse of authority against compliant taxpayers and the business community, Prime Minister Shehbaz Sharif has established a high-powered committee, headed by the Minister for Finance and Revenue, to reassess the proposed amendments and propose safeguards.

The committee will also include the Ministers of Law and Economic Affairs Division, the Minister of State for Finance, SAPM Industries, and the Chairman of the FBR.

The statement further explained that the committee will explore options to ensure legitimate economic activities are not hampered and will propose additional protective measures against unlawful authority. The committee is expected to submit its recommendations to the Prime Minister within three days.