Tax fraudsters: Punishments will be reassessed: Aurangzeb

ISLAMABAD: Finance Minister Muhammad Aurangzeb Monday said the government will review the punishments including penalty, arrest and imprisonment to the persons committing tax fraud under the Finance Bill (2025-26).

He assured this to the Senate Standing Committee on Finance during the review of the Finance Bill 2025-26.

The committee alongside the federal minister for finance and revenue said that he will inform the prime minister of the committee’s recommendations regarding this legislation. The committee believed that implementation of recommendations will make the real difference.

Arrest for tax fraud: Senate panel for defining a threshold

The committee headed by Senator SaleemMandviwalla adopted the revised Section 37A (power to inquire and investigate offences warranting prosecution under this Act) and Section 37AA (powers to arrest) as proposed by Senator Farooq H Naek.

The revised draft of the said sections, prepared by Senator Naek, was read by FBR Member Inland Revenue (Policy) before the committee. Committee members were of the view that the punishment of 10 years imprisonment to the persons committing tax fraud is very harsh and needs to be reduced. The committee proposed reduction in imprisonment period from 10 to five years.

Some committee members also proposed reduction in fine from Rs10million to Rs5 million.

The committee also proposed that the tax fraud should be a bailable offence under the Sales Tax Act. The purpose of the FBR is to focus on recovery from taxpayer and even two years imprisonment is more than enough.

On the issue of “Offences, Penalties, and Punishment on Tax Fraud,” Senator Farooq H Naek proposed multiple legal refinements, including reducing penalties for tax fraud from Rs10 million to Rs5 million, reducing the sentence from 10 years to five years, requiring the issuance of three separate notices before prosecution, mandating the High Court to decide tax appeals within 60 days and separating inquiry, investigation, and court trial phases.

Senator Naekemphasised that a two-year sentence is already harsh for a businessman.

Ten years is excessive.

Penalties must be proportionate and not politicised, he added.

Echoing this sentiment, Senator ShibliFaraz said that the tax laws must not be used for political victimisation.

The committee appreciated the valuable input of Senator Naek who through his extensive experience in legislation guided the committee clause by clause in the language and legal framework of the bill.

The committee also rejected the proposal for collecting 100 percent penalty of tax loss and default surcharge from a person, already arrested under tax fraud. Under the proposed law, any person who commits tax fraud, shall be liable to imprisonment for a term which may extend to ten years or with fine which mayextend to Rs10 million or with both and shall also be liable to pay the amount equal to the loss of tax caused including onehundred percent penalty of tax loss and default surcharge.

Copyright Business Recorder, 2025