Arrest for concealing income: Senate rejects proposed adjustments to tax law

ISLAMABAD: The Senate’s Standing Finance Committee unanimously rejected the proposed changes to the Income Tax Act that would allow the Federal Tax Office (FBR) to arrest and prosecute anyone on suspicion of income concealment, in what is known as a Draconian Act.

As the first meeting of the Finance Committee began to take up the 2021 Finance Act, members, one by one, including the ruling party’s senator and its allies, strongly opposed delegation to the FBR, stating that doing so would contravene the government’s claim to the elimination of harassment by tax officials with the aim of broadening the narrow tax base.

At the beginning of the meeting, Senator Sadia Abbasi pointed out the powers proposed to the FBR under Section 203A, stating that even a murderer cannot be punished without being given an opportunity, but there is none in the proposed law such provision to the taxpayer.

The FBR chairman replied that these regulations already exist in the sales tax and federal consumption tax law, but not in the income tax law, which is now part of the law.

He said that the decision to arrest a person would be made at the level of the finance minister if the concealment of revenues was demonstrated in the third-party audit.

Senator Mohsin Aziz of the ruling party also opposed section 203A, stating that while the tax rate is very low and there is massive tax evasion, this provision contradicts the prime minister and finance minister’s request to end the harassment by the tax authorities.

Saleem Mandviwalla of the PPP called the proposed law “draconian” and stated that there is no way we will accept it.

PML-Q Senator Kamil Ali Agha and others also joined him, saying that the government wanted to protect taxpayers from FBR harassment and that such a law would be proposed.

However, we would not allow this to happen, he added.

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

With the Finance Act 2021, the FBR proposed Section 203A (Authorization to Arrest and Prosecute) in the 2001 Income Tax Ordinance.

The committee also opposed the inclusion of online services in the VAT system with a majority vote, but the definition of the online marketplace was accepted.

The FBR stated that if the person suspected of withholding income or of a criminal offense punishable under this Regulation is a company, any director or officer of that company, of whom the agent has reason believes that he is personally responsible for the actions of the contributing company for concealing income or for a criminal offense that can be prosecuted under this Ordinance is punishable by imprisonment.

Unless an arrest does not release the company from the obligation to pay taxes, late payment surcharges and penalties under this Ordinance.

Copyright Business Recorder, 2021