Arrest for concealment of income: Senate panel turns down proposed changes in tax law

ISLAMABAD: The Senate Standing Committee on Finance has unanimously turned down the proposed changes in the income tax law that allows the Federal Board of Revenue (FBR) to arrest and prosecute any person on suspicion of concealment of income, terming it a draconian law.

As the first sitting of the Finance Committee started to take up the Finance Bill 2021, the member one after another including the ruling party's senator and its allies strongly objected to the powers being given to the FBR, and stated that it was contradictory to the government claim of doing away with harassment by the tax officials with the objective to broaden the narrow tax base.

As the proceedings of the meeting started, Senator Sadia Abbasi pointed out the powers being proposed to the FBR under Section 203A, and stated that even a murderer cannot be awarded punishment without being provided an opportunity, but in the proposed law no such provision is available to the taxpayer.

Responding to this, the FBR chairman stated that these provisions already exist in the sales tax and the federal excise laws, but were not in the income tax law, which are now being made part of the law.

He said that the decision to arrest any person would be taken at the level of the Finance Minister, if the concealment of income would be proven in the third-party audit.

Senator Mohsin Aziz of the ruling party also opposed the Section 203A, and stated that although, the tax-to-GDP ratio is very low and there is massive tax evasion, this provision contradicts the prime minister's and the finance minister's claim of doing away with harassment by the tax officials.

Saleem Mandviwalla of the PPP described the proposed law as "draconian", and stated that we will not accept it in any case.

Senator Kamil Ali Agha of the PML-Q and others also joined him and stated that the government on the one hand wanted to protect the taxpayers against harassment by the FBR, while on the other hand, this kind of law is being proposed.

However, we would not let this happen, he added.

The committee members opposed the provision and unanimously rejected Section 203A (Power to arrest and prosecute) in the Income Tax Ordinance, 2001.

Through the Finance Bill 2021, the FBR has proposed Section 203A (Power to arrest and prosecute) in the Income Tax Ordinance, 2001.

The committee also rejected bringing online services into the sales tax regime with majority vote but definition of Online market place was accepted.

The FBR stated that where the person suspected of offence of concealment of income or any offence warranting prosecution under this Ordinance is a company, every director or officer of that company whom the authorised officer has reason to believe is personally responsible for actions of the company contributing to offence of concealment of income or any offence warranting prosecution under this Ordinance shall be liable to arrest.

Provided that any arrest shall not absolve the company from the liabilities of payment of tax, default surcharge and penalty imposed under this Ordinance.

Copyright Business Recorder, 2021