Karachi, November 22, 2023 – The Federal Board of Revenue (FBR) has bestowed unprecedented powers upon Inland Revenue officers to arrest individuals involved in sales tax fraud during the tax year 2024.
The move comes as part of the latest amendment to the Sales Tax Act, 1990, specifically under Section 37A.
According to sources within the FBR, the powers granted to the Inland Revenue officers under Section 37A of the Sales Tax Act empower officers not below the rank of an Assistant Commissioner of Inland Revenue or any officer of equal rank authorized by the FBR to arrest individuals suspected of committing tax fraud or any other offense warranting prosecution under the Act. The decision to arrest will be based on substantial material evidence.
The updated Section 37A outlines the procedures for arrest, emphasizing adherence to the relevant provisions of the Code of Criminal Procedure, 1898 (Act V of 1898). This ensures that the process is conducted within the legal framework, safeguarding the rights of the individuals involved.
The amendment also introduces the provision for the Commissioner to compound the offense in cases of tax fraud. This means that, either before or after initiating proceedings for the recovery of tax, the Commissioner has the authority to settle the matter if the accused party pays the outstanding tax amount along with the applicable default surcharge and penalty as determined under the provisions of the Sales Tax Act.
Moreover, the amendment highlights the accountability of directors or officers of a company in cases where the company is suspected of tax fraud. If an authorized officer has reason to believe that a director or officer is personally responsible for the actions of the company contributing to tax fraud, they shall be liable to arrest. However, it’s crucial to note that any arrest made under this provision does not absolve the company from its financial obligations, including the payment of tax, default surcharge, and penalty imposed under the Sales Tax Act.
The decision to grant such powers to Inland Revenue officers underscores the government’s commitment to strengthening tax enforcement mechanisms and ensuring compliance with tax laws. By enabling officers to take swift action against tax evaders, the authorities aim to create a deterrent effect and foster a culture of tax compliance within the business community.
Stakeholders have expressed varied opinions on this development, with some praising the government’s proactive approach in tackling tax evasion, while others raise concerns about the potential misuse of such powers. The FBR, in response, has assured that the implementation will be closely monitored to prevent any misuse and to maintain the balance between enforcement and safeguarding individual rights.
As the tax year 2024 approaches, the business community and taxpayers at large will be closely watching the impact of these newly conferred powers on the nation’s fiscal landscape. The success of this initiative will likely depend on how effectively the authorities strike a balance between enforcing tax laws and protecting the rights of individuals and businesses.
