Govt Limits FBR Powers to Make Arrests in Tax Fraud Cases

The federal government has agreed to relax stringent provisions on tax fraud punishment in the Finance Bill 2025 after strong opposition from the Senate Standing Committee on Finance. The committee, chaired by Senator Saleem Mandviwalla, adopted revised Sections 37A and 37AA of the Sales Tax Act, reducing the proposed jail term for tax fraud from 10 years to 5 years and the fine from Rs. 10 million to Rs. 5 million. It also recommended making tax fraud a bailable offence and requiring the issuance of three separate notices before any prosecution. The Finance Minister assured the Senate panel that the recommendations would be shared with the Prime Minister for incorporation. Separately, Prime Minister Shehbaz Sharif directed the incorporation of six safeguards to restrict FBR’s power to arrest top executives. Arrests would only be allowed if the fraud exceeds Rs. 50 million, and after FBR’s special board, including a private sector representative, approves the case. Those involved in cases below Rs. 50 million will still be investigated but not arrested. The accused must have ignored three summons, attempted to flee, or tampered with evidence. A three-member board will now be responsible for approving any arrests related to tax fraud. Arrests will also be permitted if the accused fails to respond to three official notices, is suspected of destroying evidence, or is deemed a flight risk. Once arrested, the individual must be presented before a magistrate within 24 hours.