Editorial
In a move reflecting mounting concerns from Pakistan’s business community and legislators, the federal government is reevaluating controversial amendments to the Sales Tax Act, 1990, that would empower Federal Board of Revenue (FBR) officers to arrest alleged tax evaders. While the stated intent is to curb tax fraud, the sweeping arrest powers granted to lower-ranking officers have drawn sharp criticism, with many warning of potential harassment, extortion, and erosion of taxpayer trust.
Prime Minister Shehbaz Sharif’s decision to form a high-level committee to review the proposed Section 37AA marks an acknowledgment of these apprehensions. The clause would allow assistant or deputy commissioners to arrest individuals on suspicion of tax fraud—with prior approval from a commissioner. Though this requirement appears to introduce a check, business leaders argue it is insufficient to prevent abuse.
Pakistan Business Council CEO Ehsan Malik aptly described the provision as “draconian,” noting its potential to be weaponized against legitimate taxpayers. Such unguarded enforcement risks reinforcing Pakistan’s chronic problem: an adversarial rather than facilitative tax culture.
FBR Chairman Mahmood Langrial has defended the intent behind the law but conceded to the need for tighter safeguards. A revised version is being considered—requiring clearance from three senior officers, limiting arrests to exceptional cases, and ensuring external review mechanisms.
While the PM has stressed that arrests should only occur in high-value fraud cases, the damage from the initial proposal has already stirred anxiety in business circles. At a time when Pakistan desperately needs to expand its tax base and cultivate compliance, coercive measures risk alienating the very constituency that drives its economy.
What the government needs is a tax policy rooted in transparency, accountability, and trust—not unchecked authority. Tax enforcement must be strict, but not arbitrary. Otherwise, reforms will only deepen resistance, not revenue.
