In a significant development around Pakistan’s Finance Bill 2025–26, Finance Minister Muhammad Aurangzeb assured the Senate Standing Committee on Finance that the government will revisit harsh punishments—especially arrest, imprisonment, and financial penalties—proposed for tax fraud. The assurance came during the committee’s ongoing review of the bill, where senators raised serious concerns over the severity of the proposed legal framework.
Led by Senator Saleem Mandviwalla, the committee formally adopted revised versions of Section 37A and Section 37AA—key provisions granting powers to investigate and arrest individuals involved in tax fraud. These revisions were proposed by senior parliamentarian and legal expert Senator Farooq H. Naek, who played a central role in redrafting the legal language.
Among the proposed reforms, the committee recommended reducing the maximum jail term for tax fraud from 10 years to 5 years, calling the original term “excessive” and “disproportionate.” Senator Naek emphasized that even a two-year prison sentence is a serious deterrent for a businessperson and warned against punitive laws that may be used for political victimization.
The proposed revisions also include lowering the maximum fine from Rs10 million to Rs5 million, making tax fraud a bailable offence under the Sales Tax Act, and introducing procedural safeguards—such as requiring three formal notices before prosecution and separating the stages of inquiry, investigation, and trial. Senator Naek further suggested that tax appeals be adjudicated by the High Court within 60 days to ensure speedy justice.
Echoing Naek’s stance, Senator Shibli Faraz stressed that tax laws must never become tools for political revenge. The committee also dismissed a controversial clause that would require a person arrested for tax fraud to pay a 100 percent penalty on the tax loss, in addition to default surcharges—deeming it legally and ethically excessive.
The finance minister confirmed he would present the committee’s recommendations directly to the prime minister, suggesting that meaningful reforms could soon reshape how Pakistan handles tax fraud—shifting from harsh penalization to a more balanced, fair, and business-friendly approach.
