Review Panel for Examining Arrest Powers under Taxation Laws: PM Orders Formation
Pakistan's Prime Minister Sets Up Special Committee to Revisit Tax Arrest Powers
In response to recent public outcry over tax evasion arrests, Prime Minister Shehbaz Sharif has established a special committee to scrutinize the arrest powers under tax laws and the proposed amendments, making it crystal clear that the government will not condone the harassment of law-abiding taxpayers or members of the business community.
Chairing a high-level meeting concerning the Federal Board of Revenue (FBR), the prime minister exhibited concern over media reports implicating tax evasion arrests of defaulters. Officers briefed him that the authority to arrest individuals for tax-related matters had been in place since the 1990s, with proposed amendments now aligned with rulings from superior courts.
*Thresholds for Arrests*
The prime minister's directive emphasized that no legislative adjustments be utilized to intimidate compliant taxpayers or members of the business community. Highlighting his stance, Sharif stated, "Harassment of regular taxpayers will never be tolerated. The honor and respect of the business community, investors, and taxpayers must be upheld."
Considering an effective external review mechanism and a system of checks and balances, the prime minister urged that arrest powers should be confined to instances involving substantial-scale tax evasion. Moreover, he mandated that protective clauses against misusing these powers should be incorporated into the upcoming Finance Act. Furthermore, he insisted that all proposed amendments must be discussed in consultation with coalition partners in parliament.
The meeting attended by federal ministers, economic experts, senior government officials, and other dignitaries recognized the need for stronger safeguards to prevent potential abuse of arrest powers by tax officers. To that end, the proposedconditions for the arrest of senior executives (CEOs, CFOs, and directors) necessitate approval from a Commissioner and adherence to six stringent conditions:
- Evading arrest by fleeing
- Tampering with evidence
- Failed appearance after three issued summonses
- Reaching a specific tax fraud threshold (Rs. 50 million for executives)
- Committing a serious fraud
- Approval from a special FBR board, including a Chamber of Commerce representative
*Broadening the Perspective*
The government is currently considering revisions to the draft law, necessitating approval from multiple senior officers before any arrest can take place. The proposed amendments are part of the Finance Bill 2025-26 and have been subject to parliamentary committee scrutiny, with reservations and recommendations raised for clear thresholds and due process for arrests. Fearing potential misuse, both the Senate Standing Committee on Finance and Revenue and the National Assembly Standing Committee on Finance have called for procedural safeguards.
In essence, the special committee’s efforts revolve around implementing checks and balances to minimize arbitrary detentions, requiring higher-level approvals and specific conditions for arrests, and ensuring parliamentary and stakeholder consultation before finalizing any new powers for tax authorities.
The prime minister stressed that the proposed amendments should not be used to intimidate regular taxpayers or the business community, asserting that harassment of compliant taxpayers will not be tolerated. He mandated that arrest powers should be limited to instances of substantial-scale tax evasion and suggested incorporating protective clauses against the misuse of these powers in the upcoming Finance Act. The government is also working on broadening the perspective by seeking parliamentary approval for clear thresholds and due process for arrests, aiming to minimize arbitrary detentions and ensuring consultation with coalition partners, stakeholders, and other relevant bodies in the finance and defi sectors.
