Tax Evasion
ISLAMABAD: In the wake of the federal government’s drive to boost tax revenues, Federal Board of Revenue (FBR) Chairman Rashid Mahmoud Langrial has staunchly defended the proposed powers allowing the tax authority to arrest corporate leaders involved in tax fraud.
The proposal, included in the Finance Bill 2025-26, has sparked heated debate during a session of the Senate Standing Committee on Finance.
Langrial argued that FBR’s assumption of arrest powers under the Code of Criminal Procedure (CrPC) is justified, citing global precedent. “There is no country in the world where tax officers are not permitted to make arrests for tax fraud,” he stated. Drawing comparisons with India and Bangladesh, he noted that their tax authorities are already empowered with similar tools.
Presenting alarming figures to underscore the rationale for the proposed powers, Langrial revealed that Pakistan’s top 1% of households are responsible for evading taxes worth Rs1,233 billion, while the top 5% collectively evaded Rs1,611 billion. In contrast, the remaining 95% of the workforce evaded only Rs140 billion, he said. Pakistan’s total workforce stands at around 67 million.
The FBR chairman’s remarks were made in the context of the government’s ambitious Rs17.57 trillion federal budget for the fiscal year 2025-26, which targets 4.2% GDP growth. Finance Minister Muhammad Aurangzeb earlier set a tax revenue goal of Rs14.131 trillion — an 18.7% increase from the current year — with Rs8.206 trillion earmarked for provincial transfers.
Non-tax revenue is projected at Rs5.147 trillion, while federal net revenue stands at Rs11.072 trillion. The largest portion of expenditure, Rs8.207 trillion, will go to debt servicing.
Langrial also pushed for economic reforms beyond taxation, urging the Senate to consider removing protective import tariffs that encourage inefficiencies and promote nepotism in corporate appointments. “Protectionism has led to unqualified individuals becoming CEOs through political and economic patronage,” he said.
However, the proposed arrest powers were met with strong resistance from lawmakers across party lines. Senator Anusha Rahman of the ruling PML-N questioned the legality and fairness of the proposal, arguing that tax matters should not be criminalized based solely on intent. “FBR has removed CrPC and assumed such powers. How can someone be arrested for intent?” she asked.
Senator Farooq H. Naek of the PPP also criticized the move, calling the proposed powers “draconian,” while PTI’s Senator Shibli Faraz warned that Pakistan risked becoming a police state if such authority was granted to tax officials.
The Senate panel continued to review other aspects of the Finance Bill 2025-26. It recommended removing the 18% general sales tax (GST) on imported solar panels and raising the minimum monthly wage from Rs37,000 to Rs40,000.
The session also touched on the FBR’s role in enforcing the Anti-Money Laundering (AML) Act. Lawmakers voiced concerns over the issuance of AML-related notices to approximately 250 companies. Senator Naek suggested that future AML notices should require approval from the finance minister and FBR chairman to avoid misuse.
Finance Minister Aurangzeb acknowledged these concerns, stating that the government would reassess the FBR’s powers under the AML law. A proposal to establish a new Directorate General of Intelligence and Risk Management (Customs) under the Finance Bill was also discussed. This new entity would be empowered to act under the AML framework and investigate smuggling and vehicle fraud.
One clause, Section 187A, introduces a presumption that vehicles with tampered or altered chassis numbers would be treated as smuggled and subject to confiscation — even if registered with a motor vehicle authority. This provision prompted further debate on FBR’s expanding enforcement powers.
Senator Rahman reiterated the need for caution, stating that giving broad arrest powers to FBR could set a dangerous precedent and erode public trust in the tax system.
