Law Minister Barrister Farogh Nasim assured the Senate that the provision would be toned down regarding the Federal Board of Revenue being granted “fundamental and sweeping powers” to make arrests and prosecute taxpayers over concealment of income, The News reported Wednesday.
According to the proposed changes, all officers of Inland Revenue, starting from the assistant commissioner, could arrest a taxpayer accused of a tax offence without even filing a complaint before a special judge.
Thus, a concept of pre-trial arrest and detention is being introduced to the income tax law for the first time. The only requirement for arresting a taxpayer is that the officer effecting the arrest ‘believes’ that the taxpayer has committed an offence that can be prosecuted under the law. Even the prior filing of a complaint before the special judge will not be required.
However, the Senate Standing Committee on Finance has rejected the proposed powers of the FBR officers for arresting and prosecution of taxpayers on suspicion of concealment of income. The Opposition members termed the proposed powers of the FBR officers as ‘draconian’ and made it clear that they would not grant approval in the Parliament.
The question arises why the FBR proposed more sweeping powers when the Income Tax Ordinance, 2001 already has provisions for prosecution.
Tax experts say that the Income Tax Ordinance 2001 includes a complete chapter containing provisions for the prosecution of a wide range of offences ranging from the concealment of income to non-filing of returns and statements.
Punishments for these offences include imprisonment for periods extending from one year to seven years and fines up to Rs5 million. These punishments are in addition to any other liability imposed on the defaulter under the ordinance, including the recovery of the evaded tax, imposition of penalty, and default surcharge.
The procedure required for prosecuting and awarding punishment to the defaulter includes filing a case before a special judge appointed by the federal government. Only a person, who is or has been a sessions judge, can be appointed a special judge for the purposes of trying income tax offences.
The Commissioner of Income Tax can file a complaint before the special judge who will conduct the proceedings under the Code of Criminal Procedure 1898. Appeal against the order of the special judge lies with the High Court. The defaulter can be arrested and imprisoned only after completion of the trial by the special judge resulting in the award of punishment.
According to the proposed law, the officer initiating the arrest will intimate the special judge about the arrest and produce the arrested person before the special judge or a judicial magistrate within 24 hours of the arrest and the special judge may order detention for an unspecified period or accept a request for bail.
The special judge, on the request of the arresting officer, may also remand the arrested person in the custody of the arresting officer for a period of 14 days for the purpose of conducting an inquiry. The provision of remand in the custody of the inquiry officer is self-contradictory because the arrest is supposed to be affected if the arresting officer has material evidence in possession that the person being arrested has committed an offence leading to prosecution.
Another provision of the proposed law proving that the powers to arrest will be used without any evidence is that if after arrest and inquiry the officer is of the opinion that there is not sufficient evidence or reasonable ground for suspicion against such person, they shall release then upon the execution of a bond, and shall direct such person to appear if so required, before the special judge and request the special judge for the discharge of such person.
The proposed law totally disregards the normal procedure for assessment of tax under the Income Tax law and attempts to introduce a parallel system of inquiry and determination of liability but fails to specify whether these dual systems will operate independently or one will follow the other.
It has to be kept in mind that a similar system of arrest is available under the Sales Tax and Federal Excise laws as the nature and scheme of these laws are entirely different from Income Tax and such powers can be justified for the administration of these taxes.
But even in the case of sales tax, the courts have not approved these coercive powers without prior quantification and adjudication of the tax liability under the normal procedure. However, while attempting to acquire similar powers under the Income Tax Laws FBR seems to have ignored these judgments of the courts as well.
The explanation of the proposed powers to arrest and detain that are completely alien to the scheme of income tax law as in force for the last 100 years since the promulgation of the Income Tax Act of 1922 is sufficient to show the draconian nature of the proposed law.
There is ample possibility of misuse of these powers to harass the taxpayers leading to corrupt practices. It is not understandable as to why the finance minister who himself has acknowledged and expressed concern over the harassment of taxpayers by the FBR wants to arm the same officers with such oppressive and arbitrary powers that will take harassment to an altogether unprecedented level.
The finance minister intended to use this budget and the finance bill to stimulate economic recovery and growth but giving such crushing powers to the FBR will totally destroy the confidence of businessmen and common taxpayers.
Regarding the proposed ordinance, the law minister agreed in principle that it would be inappropriate to arrest a person prior to adjudication and said that provisions to this effect in the income tax, sales tax and customs laws would be reviewed, according to a report by Dawn.
The issue was raised in the house by PPP parliamentary leader in the Senate Sherry Rehman who termed provision 203-A against the fundamental rights.
“The powers to arrest given to tax officers appear to be a mini-martial law,” she said.
The PPP leader said that the matter was also discussed in the meeting of the Senate Finance Revenue and Economic Affairs Committee which unanimously rejected it and called for removing the provision from the finance bill. She said the meeting was told that the same provision was there in the Customs Act.
The issue was raised in the Senate by PPP leader Sherry Rehman
Leader of the Opposition in the Senate Syed Yousuf Raza Gilani also sought an assurance from the government that no such step would be taken through the back door.
Former Senate chairman Mian Raza Rabbani referred to the inclusion of the word ‘retail’ in the definition of smuggling under the Customs Act and warned that it would open Pandora’s box. He said that tax officers would be able to carry out raids at small retail outlets and that would open another door for corruption in the country.
Senator Azam Nazir Tarar of the PML-N also touched upon the issue while taking part in the budget discussion and stressed that arrests in fiscal offences took place after adjudication.
He said that if the provision was allowed to stay as it was, the people accused of concealing their income would be put behind bars without being given the right of hearing. He also criticised the government for imposing 15 per cent sales tax on milk and yogurt and increasing the prices of a number of other essential commodities, including sugar, wheat flour and ghee, and said the budget offered nothing positive for the poor and middle class.
Law Minister Nasim disagreed with the opposition’s stance that the budget was anti-people. “If it is so, why chambers of commerce across the country are praising the budget? With due respect, it is not so,” he remarked.
He also rejected as baseless the charges of fudging figures and imposing anti-people taxes and offered a live debate between economic teams of the opposition parties and the government on the budget with facts and figures. “It is not a challenge, it is a request,” he said.
The minister asked the opposition to point out figures it alleged had been fudged and the taxes it believed were anti-people and said a correction would not be possible with general accusations.
Observing that inflation was a complex issue, he expressed the hope that with the steps underway, a visible change would be there over the next six months.
About allegations of political victimisation of opponents, he said that many of the cases being faced by some opposition leaders had been registered before the PTI came into power. He said that NAB, FIA and anti-corruption departments were independent bodies, adding that the cases were adjudicated upon by the judiciary which was also independent.
Referring to a letter written by the FIA to Leader of the Opposition in the National Assembly Shehbaz Sharif, seeking certain details, the law minister said the government had nothing to do with it.
As many as six bills already passed by the National Assembly, including two bills seeking amendments to the Elections Act, were introduced in the house and referred to the Senate’s standing committees concerned.
The bills included Elections (Amendment) Bill, 2021; Elections (Second Amendment) Bill, 2021; and a bill to effectually tackle the pervading instances of rape and sexual abuse in respect of women and children through changes in the substantive law.
The Criminal Law (Amendment) Bill, 2021, the Regulation of Generation, Transmission and Distribution of Electric Power (Amendment) Bill, 2021, as passed by the National Assembly, will be taken into consideration.
Barrister Ali Zafar of the PTI, while taking part in the budget discussion, though praised the budget saying this had a new economic agenda for Pakistan, yet found faults with some of the proposals.
He pointed out that in the budget there was a proposal for price control mechanism to be put back in place. He said: “I would suggest reconsideration. This has never worked in the past and it will not work in future also.”
