Responding to widespread public concern, the federal government has decided to significantly restrict the proposed arrest powers of tax officials and revise the newly suggested income tax on cash-on-delivery (COD) transactions. These decisions followed direct intervention from Prime Minister Shehbaz Sharif after business leaders and the public expressed strong opposition to clauses in the finance bill that granted sweeping arrest powers to Federal Board of Revenue officers.
Finance Minister Muhammad Aurangzeb informed the National Assembly Standing Committee on Finance that new safeguards would now be added to ensure these powers are not misused. The proposal originally allowed FBR to arrest individuals for tax fraud without the need for a magistrate’s warrant, triggering criticism from across sectors. Aurangzeb shared that PM Sharif instructed that arrests be limited to major fraud cases, with the threshold likely to be set above Rs50 million.
FBR Chairman Rashid Langrial elaborated that arrests would only apply under specific conditions, including attempts to flee the country, evidence tampering, or non-compliance with three prior notices. Importantly, arrests must now be approved by a three-member FBR board instead of any individual junior officer.
At the same committee meeting, chaired by PPP’s Syed Naveed Qamar, members also objected to allowing FBR access to taxpayer information via banks and its proposed authority to enter business premises. Lawmakers expressed concern over how such powers could be exploited, citing FBR’s reputation. MNA Sharmila Faruqui called it a potential replication of NAB-style overreach, and MNA Ali Sarfraz argued that such powers could open new opportunities for corruption under the guise of revenue generation.
FBR’s revised taxation on cash-on-delivery purchases was also addressed. The government initially proposed an income tax between 0.25% and 2% on such transactions. State Minister for Finance Bilal Azhar Kayani clarified that separate rates would apply for cash and digital payments, with a higher rate on cash to discourage non-digital transactions. FBR Member Policy Najeeb Memon said the government aims to collect Rs59 billion from this new policy.
The committee further debated tax rebates for teachers and researchers, which had previously been committed by FBR to continue. MNA Nafisa Shah pointed out a contradiction between the FBR’s commitment and the current budget amendment. Langrial noted that IMF did not agree to continue the 25% rebate beyond June 2025, but he intends to revisit the matter in discussions with the Fund.
Tax regulations concerning non-profit organisations have also been made more stringent. Langrial explained that NPOs must now file returns to claim tax credit, and FBR has been given oversight to evaluate their business activities. These changes are part of broader budgetary adjustments influenced by IMF guidelines.
Amid sharp criticism regarding corruption within FBR, Chairman Langrial committed to overhauling key field positions. He stated that if by July 1, at least 90% of these roles are not held by individuals with clean records, he would step down from his post. This statement followed remarks by several lawmakers expressing distrust in the agency’s ability to wield greater powers responsibly.
