With the ability to arrest folks, FBR will solely harass residents, warns Miftah Ismail

  • Miftah Ismail says an oil levy tax of Rs 610 billion would lead to inflation.
  • PML-N chief says the government illegally allocated 292 billion rupees for privatization.
  • Miftah urges the government to reverse the taxation decision on sick pay taxation for government employees.

Former Treasury Secretary Miftah Ismail warned Sunday that the PTI government’s decision to give the Federal Board of Revenue (FBR) powers to arrest people would result in harassment of citizens.

“The FBR tax inspector has the right to arrest people. This will not increase the income, but the FBR will harass the people, “Ismail said in a press conference on the budget. He also said the FBR has yet to repay the people 700 billion rupees.

The PML-N leader claimed that it was thanks to Party President Shahbaz Sharif that the PTI government had “turned around” in the taxation of baby milk and food. He also alleged that the Imran Khan government had illegally allocated 292 billion rupees for privatization.

Read more: Government aims to increase the “philanthropic” budget by 4.8%

Ismail said the government provided rupees 610 billion from the oil levy. He said that by calculation this would mean a levy of Rs30.50 would be levied.

The PML-N leader said that it would spell an increase in oil prices and ultimately lead to inflation.

The former finance minister claimed the World Bank had stopped making payments to Pakistan.

“These people (PTI ministers) haven’t achieved an IMF target in the past two years. They suspended the IMF program, ”said Ismail.

He also called on the government to reverse the decision to tax government officials with sick pay.

Finance law suggests giving the FBR full powers to make arrests

The Finance Act 2021-22 has proposed granting the FBR some “basic and extensive powers” to make arrests and prosecute taxpayers for concealing income, The News reported earlier this week.

Under the proposed changes, all Inland Revenue (IR) officials, starting with the Deputy Commissioner, could arrest a taxpayer charged with a tax crime without even filing a complaint before a special judge.

This is the first time that a concept of pre-trial detention and pre-trial detention is introduced into income tax law. The only requirement for a taxpayer to be arrested is that the officer making the arrest “believes” that the taxpayer has committed an offense that may be prosecuted under the law. It is also not necessary to submit a complaint to the special judge in advance.

Read more: Budget 2021-22 at a glance

However, the Senate Standing Finance Committee has rejected the proposed powers of FBR officials to arrest and prosecute taxpayers on suspicion of concealing income. The opposition members described the proposed powers of the FBR officers as “draconian” and made it clear that they would not give parliamentary approval.

The question then arises why the FBR is proposing more far-reaching powers when the Income Tax Ordinance (ITO) 2001 already contains provisions on criminal prosecution.

According to tax experts, the 2001 Income Tax Ordinance contains a complete chapter with provisions for the prosecution of a wide variety of offenses, ranging from the concealment of income to the omission of declarations and explanations.

The penalties for these offenses include imprisonment from one year to seven years and fines up to 5 million rupees. These penalties are in addition to any other liability placed on the defaulting party under the Regulation, including recovering the tax evaded, applying a penalty and a late payment penalty.

The process required to prosecute and punish the debtor involves filing a case before a federal government-appointed special judge. Only a person who is or was a session judge can be appointed as a special judge.

Read more: Proposed tax on internet data to be removed from the budget, says Hammad Azhar

The Commissioner of Income Tax can lodge a complaint with the special judge who conducts the proceedings under the Code of Criminal Procedure 1898. The decision of the special judge can be appealed to the High Court. The offender can only be arrested and imprisoned after the trial by the special judge, which leads to a penalty.

Now, the Finance Act 2021 plans to fundamentally change the procedure outlined above and to grant FBR officials extensive powers to arrest and detain taxpayers.

According to the proposed law, the officer initiating the arrest will notify the special judge of the arrest and bring the arrested person before the special judge or a judicial judge within 24 hours of the arrest, and the special judge may order indefinite detention or make a motion accept on bail.

At the request of the arresting officer, the special judge can also take the arrested person into pre-trial detention for a period of 14 days for the purpose of investigations. The arrangement of pre-trial detention in pre-trial detention is contradictory because the arrest is supposed to be affected if the arrested person has material evidence that the arrested person has committed a criminal offense.

Another provision of the proposed law that proves that the power to arrest is exercised without evidence is that if, after arrest and investigation, the officer believes that there is insufficient evidence or reasonable suspicion against that person, he will be released will enforce a band and instruct that person, if necessary, to appear before the special judge and request the special judge to dismiss that person.

The proposed law completely disregards the normal tax assessment procedure under the Income Tax Act and seeks to introduce a parallel system of determination and determination of liability, but does not specify whether these dual systems function independently of one another or follow one another.

It must be remembered that a similar system of arrest is foreseen under the Sales Tax and Federal Excise Tax Acts, as the nature and system of these laws are completely different from income tax and such powers to administer these taxes may be justified.

Read more: The Pakistani government wants to increase the cigarette tax

But even in the case of sales tax, the courts have not approved these compulsory powers without prior quantification and assessment of the tax liability in the ordinary process. However, in attempting to gain similar powers under income tax laws, the FBR appears to have ignored these court rulings as well.

Explanation of the proposed powers of arrest and detention, completely alien to the Income Tax Act system as it has been in place for the past 100 years since the 1922 Income Tax Act was promulgated, is sufficient to demonstrate the draconian nature of the proposed bill .

There is a potential for these powers to be misused to harass taxpayers, resulting in corrupt practices. It is incomprehensible why the Treasury Secretary, who himself has admitted and voiced his concern about the FBR’s harassment of taxpayers, wants to equip those same officials with such repressive and arbitrary powers that will take the harassment to unprecedented levels.

The Treasury Secretary intended to use this budget and finance bill to fuel economic recovery and growth, but giving the FBR such devastating powers would completely destroy the confidence of businessmen and general taxpayers.