PBF, industrial bodies oppose Section 37AA of Income Tax Ordinance

KARACHI: In a unified stance against the recently introduced Section 37AA of the Income Tax Ordinance, the Pakistan Business Forum (PBF) along with representatives from various trade and industrial associations, voiced strong opposition to the clause.

PBF President, Khawaja Mehboob ur Rehman described Section 37AA as a deeply troubling addition to the tax framework, one that could gravely harm the business environment in Pakistan. “Even with the amendment, the clause remains draconian. Empowering tax officials to order arrests without judicial oversight is wholly unacceptable,” he asserted.

According to Mehboob, the clause gives tax officials unchecked authority to detain any taxpayer on suspicion of fraud, without requiring solid proof. He emphasized that this creates a climate of fear and uncertainty, likening the provision to a “sword hanging over the heads” of entrepreneurs and investors. He also highlighted how the definition of tax fraud had already been significantly broadened, and the new powers only heighten the risk of harassment and abuse.

The business community, he said, sees this move as a violation of both justice and constitutional rights. Despite the government’s subsequent revision; adding a condition that arrests would only occur in cases involving more than Rs50 million in tax losses and with committee approval, PBF President dismissed the amendment as inadequate. “This doesn’t address the root issue. There is still no requirement for concrete evidence or judicial oversight.”

PBF Karachi Chief, Malik Khuda Baksh echoed these concerns, warning that such laws further complicate the investment landscape. “We have always supported reforms, but not at the cost of investor confidence and business sustainability,” he said.

He added that unless the government rethinks its approach, the ambitious economic targets outlined in the federal budget; including a 4.2% GDP growth rate and $35.3 billion in exports would be unattainable.

PBF urged parliament and Prime Minister of Pakistan to withdraw the clause in full to allow the private sector to focus on growth rather than defend itself against what they see as arbitrary enforcement.

PBF officials concluded by stressing that sustainable economic development requires trust between the government and the business community. Heavy-handed policies, they warned, will only deepen the economic crisis unless replaced with more constructive and collaborative tax reforms. With a GDP growth target of 4.2pc and an export target of $35.3bn, the government cannot afford to alienate the business community. Laws like this will only make these targets harder to reach.

Copyright Business Recorder, 2025