Moves aim to address public, business concerns over potential misuse
In response to widespread criticism from citizens and the business community, the federal government has decided to significantly curtail the proposed arrest powers of tax officials and simplify the income tax mechanism on cash-on-delivery (COD) transactions.
The decision came following Prime Minister Shehbaz Sharif’s intervention after concerns were raised over granting arrest authority to junior Federal Board of Revenue (FBR) officials. The matter was discussed in detail during a meeting of the National Assembly’s Standing Committee on Finance, chaired by PPP’s Syed Naveed Qamar.
Finance Minister Muhammad Aurangzeb informed the committee that the prime minister had directed the inclusion of strict safeguards to limit the FBR’s arrest powers. The government had initially proposed allowing the FBR to arrest individuals for tax fraud without a warrant — a move that sparked public and political backlash.
MNA Sharmila Faruqui warned against turning the FBR into “another NAB,” and strongly opposed the proposal allowing the FBR to share taxpayer data with commercial banks.
According to PM Shehbaz, arrest powers should only be applicable in cases involving large-scale tax fraud, with thresholds expected to exceed Rs50 million. FBR Chairman Rashid Langrial elaborated on the planned safeguards, stating that arrests would only be permitted in specific cases — such as an attempt to flee the country, tampering with evidence, or repeated failure to respond to FBR notices.
He added that an internal FBR board of three senior officials, rather than junior officers, would be required to approve any arrest.
The committee also raised objections to the proposed tax on COD transactions, which ranged from 0.25% to 2%. Minister of State for Finance Bilal Azhar Kayani clarified that separate tax rates would apply for digital and cash payments, with higher rates on cash to discourage undocumented transactions and encourage digital payments.
FBR’s Member Policy Najeeb Memon said the government aims to collect Rs59 billion annually through the COD tax.
During the session, committee members also urged the FBR to request the IMF to extend tax rebates for teachers and researchers beyond June 2025. MNA Nafisa Shah pointed out that while the FBR had committed to a 25% rebate, amendments to the law suggested otherwise. Chairman Langrial said the IMF had not agreed to the continuation but he would raise the issue again.
Langrial also explained that the regime for non-profit organisations (NPOs) had been tightened under IMF pressure. NPOs will now be required to file tax returns to claim exemptions, and the FBR will have the authority to scrutinise their activities.
Facing heavy criticism over alleged corruption within the FBR, Langrial made a bold statement, promising to clean up the organisation. “If, after July 1, 90% of the key field officers are not of good repute, I will resign from this position,” he declared.
His remarks followed strong resistance from lawmakers over sections of the finance bill, particularly Sections 175A and 175C, which concern FBR access to bank data and the right to enter business premises.
“The FBR is embedding itself into industry operations, which will only lead to more harassment and corruption,” MNA Nafisa Shah warned. MNA Ali Sarfraz added that allowing tax officials into business offices under the guise of revenue collection would only open “new mines of corruption.”
