ISLAMABAD:
The Pakistan Peoples Party has refused to vote in favour of new “draconian” powers for taxman to arrest people in tax fraud cases, resulting in a new round of negotiations between the two key partners of the alliance just hours before the approval of the budget from the National Assembly.
On behalf of the government, Deputy Prime Minister Ishaq Dar has reached out to the top PPP leadership who was hopeful to resolve the issue before the approval of the budget.
The government was hopeful that after adding some more safeguards, the PPP may vote for the arrest powers amendment in the Finance Bill today (Thursday)
The sources told The Express Tribune that the top leadership of the PPP conveyed to the government on Wednesday it would not vote to give arrest powers to the Federal Board of Revenue in spite of inclusion of new safeguards to have a check on these powers.
The government cannot get the budget passed from the National Assembly without the support of the PPP.
On June 12, the government proposed in the budget that the FBR can arrest people in tax fraud cases. During discussions on the budget in the National as well as Senate standing committees on finance the additional safeguards were introduced to stop the misuse of these powers. These safeguards had been proposed by the PPP.
Despite the additional safeguards, the FBR cannot be trusted; a senior PPP negotiator told The Express Tribune on condition of anonymity. The real issue was the trust on the FBR, he added.
The development surfaced a day before the approval of the budget by the National Assembly, which is scheduled to approve it on Thursday (today).
The sources said that on behalf of the government Deputy Prime Minister Ishaq Dar contacted top PPP leadership. “I am back in Islamabad and we will resolve it soon Insha’Allah,” said Ishaq Dar while talking to The Express Tribune. Dar was in the United Arab Emirates where he reached an understanding with the UAE rulers to address the serious issue of denying visas to Pakistani government officials.
Dar said that he was in contact with the President Asif Ali Zardari and the other PPP leadership. The matter regarding the arrest powers will be addressed before the approval of the budget, said the Deputy Prime Minister.
During deliberations on the budget, the chairman National Assembly Standing Committee on Finance Syed Naveed Qamar had termed the powers to arrest as “draconian”. A few members of the committee equated the FBR with the National Accountability Bureau.
On the complaints from the businesses, the Prime Minister Shehbaz Sharif had also constituted a committee to include checks on these powers.
Tax fraud has been defined as: “knowingly, intentionally or dishonestly doing any act or abets any action to cause loss of tax under this Act, including: using or preparing false, forged and fictitious documents including return, statements, annexures and invoices; false claim of input tax credit based on fictitious transactions; issuance of any tax invoice without supply of goods; tampering with or destroying of any material evidence or documents required to be maintained; generating fake input through manipulation of return filing system of the Board and making fake entries in the sales tax returns or in the annexures; and making fictitious compliance of section 73, including routing of payments back to the registered person, or for the benefit of the registered person, through a bank account held by a supplier or a purported supplier.”
Upon committing any of the above offences, the FBR will have the authority to arrest the individual without first seeking a warrant from any court of law, according to the proposed powers.
When contacted, FBR spokesman Dr Najeeb Memon said that the updated bill has already been submitted in the National Assembly by its standing committee on finance and the decision now rests with the assembly.
Unlike in the past, when the government would submit the updated bill in the National Assembly, this time the standing committee securitized the budget where FBR also proposed additional revenue measures of Rs36 billion.
In the budget, the government had proposed a total Rs435 billion new tax measures, which after the adjustments has now increased to Rs463 billion. The Chairman FBR Rashid Langrial said that describing the Rs36 billion additional measures as mini-budget was not correct since the Parliament has not yet approved the Finance Act.
The FBR chairman had told the standing committee last week that the criminality of tax fraud has been divided into two parts. In some cases, court permission will be required before an arrest is made.
He explained that crimes such as suppression of taxable supplies under the Sales Tax Act, suppression or nonpayment of withholding tax for more than three months, dealing in goods liable to confiscation and making taxable supplies without registration will require court approval for arrest.
According to the proposal, an Inland Revenue officer not below the rank of assistant commissioner — or any officer authorised by the board – may initiate an inquiry upon approval from the commissioner, if there is material evidence pointing to the commission of tax fraud or an offence warranting prosecution under the act.
The inquiry officer shall have the powers of a civil court under the Code of Civil Procedure, 1908, including summoning and enforcing attendance of any person, examining on oath, requiring discovery and production of documents and receiving evidence on affidavits.
The inquiry officer must complete the inquiry within six months. During proceedings, the officer must provide the accused with a chance to be heard and confront them with details of the alleged fraud.
A final report will then be submitted to the commissioner, who may either approve a full investigation, request further details, or close the matter.
Upon approval, the investigation must be completed within three months. The board may authorise a commissioner — through a three-member committee notified by the chairman — to issue an arrest warrant if the tax loss exceeds Rs50 million. Arrests will only be made if the accused fails to respond to three notices, attempts to flee, or is likely to tamper with evidence.
