ISLAMABAD:
A National Assembly panel on Saturday approved special powers for tax authorities to arrest individuals involved in tax fraud, while it deferred the approval of another fiscal law that would have suddenly deprived government entities of their cash surpluses.
Meanwhile, teachers and researchers will now be subject to full income tax, as the International Monetary Fund (IMF) did not agree to the government’s proposal to extend the 25% income tax rebate for another fiscal year.
Federal Board of Revenue (FBR) Chairman Rashid Langrial informed the National Assembly Standing Committee on Finance that the IMF had refused to extend the rebate.
The committee, chaired by Syed Naveed Qamar, approved legal powers for the FBR to arrest taxpayers involved in tax fraud without prior court approval.
However, additional safeguards were added to limit the discretionary use of these powers.
At one point, Qamar remarked that the tax fraud “law has been borrowed from the National Accountability Bureau”.
The Senate Standing Committee on Finance had already cleared the controversial proposal. Now, following minor amendments by the National Assembly panel, the bill is expected to become law from July 1.
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.
FBR Chairman Rashid Langrial said 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.
When asked, Langrial said the accused can also be arrested at the airport if there is suspicion of an escape attempt.
Cash surplus
The standing committee held an extended discussion on a government proposal to assert full rights over the cash surpluses held by state-owned enterprises.
The proposed amendment to the Public Finance Management Act aimed to grant the federal government control over these surpluses.
“The federal government’s budget deficit would never end, and it now wants to bankrupt the public sector companies,” Syed Naveed Qamar said.
Finance Minister Muhammad Aurangzeb argued that the companies were acting like “states within a state” and were not cooperating.
He added that even government-nominated board members were not being heeded, blaming bureaucrats for the lack of progress.
Minister of State for Finance Bilal Kayani withdrew the bill from the agenda, saying the government would reintroduce it after incorporating the committee’s recommendations to strike a balance between fiscal discipline and autonomy.
One major state-owned company was reported to be sitting on a cash surplus of Rs253 billion.
