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Aftab Maken
ISLAMABAD: The Senate Standing Committee on Finance on Sunday rejected the Federal Board of Revenue’s (FBR) proposal to impose a 10-year jail term for individuals involved in tax fraud. Members of the committee expressed serious reservations over the severity of the suggested punishment.
The meeting, chaired by Senator Saleem Mandviwalla, held a detailed discussion on proposed amendments in the Finance Bill 2025-26 regarding penalties and incentives for tax-related offences.
During the meeting, committee members rejected the 10-year jail proposal, terming it excessively harsh. Senator Mohsin Aziz remarked sarcastically that “you might as well propose life imprisonment,” adding that FBR appeared to equate tax fraud with murder.
FBR Chairman Rashid Langrial briefed the committee that the proposed 10-year imprisonment was for fraud involving over Rs 1 billion. He suggested a five-year sentence for fraud between Rs 10 million and Rs 1 billion, and lesser punishment for fraud under Rs 10 million.
The committee recommended introducing slab-based punishments based on the size of the fraud. Several members proposed fines instead of imprisonment for smaller offences. However, Committee Chairman Mandviwalla insisted that tax evaders must understand that jail is also a possible consequence.
In response, the FBR Chairman said: “Should the government allow people to steal public money without any consequences? Even bicycle and motorcycle theft leads to jail time.”
Senator Farooq H. Naek argued that if a judge has the authority to award punishment, they should also have the authority to decide arrests. The FBR Chairman replied that the existing law is already stringent and can remain if Parliament agrees. Naek, however, said he would focus on the proposed new law, not the existing one.
Finance Minister Muhammad Aurangzeb assured the committee that the government aims to improve the legal framework. “Right now, the existing law remains the law of the land,” he said.
Senator Shibli Faraz accused FBR officials of trying to pressure and blackmail the committee. “You are using the ‘my way or the highway’ approach to get your proposal approved,” he said.
Minister of State for Finance Bilal Azhar Kayani said the government would reintroduce the amendment in a revised form. “Had we retained the original version, it would have been seen as draconian,” he added.
FBR Chairman Langrial said the department would reconsider the issue and provide feedback by tomorrow. Discussions on arrest-related clauses were postponed for further deliberation.
Online Sales Tax Proposal
In another key development, the Senate Standing Committee on Finance recommended zero-rating sales tax on stationery items. The FBR also proposed appointing courier companies as tax collection agents to plug revenue leakages in e-commerce.
The committee, chaired by Senator Saleem Mandviwalla, conducted a clause-by-clause review of the Finance Bill 2025-26. Finance Minister Muhammad Aurangzeb, Minister of State Bilal Azhar Kayani, and FBR Chairman Rashid Langrial were present during the session.
The FBR informed the committee that it only intends to collect sales tax on goods delivered via courier, not on services—a clarification offered in response to objections raised by the Sindh Revenue Authority.
Langrial noted that while online buyers are charged sales tax, the collected tax often does not reach the national exchequer. To resolve this, the FBR proposed designating courier firms as tax agents since they are privy to the nature of the goods and the invoices involved.
The committee approved the FBR’s proposal to impose sales tax on online purchases and recommended removing sales tax on stationery items altogether.
Discussing other Finance Bill measures, the FBR Chairman said sales tax on imported items would be based on actual retail prices. He also said chilling charges would be capped at 5% to prevent companies from inflating expenses and evading taxes.
Addressing tax fraud mechanisms, FBR officials revealed that some entities were issuing fake invoices, collecting cash, and issuing cheques—an illegal practice that would be dealt with strictly.
Senators Mohsin Aziz and Shibli Faraz raised objections to the interpretation of “tax evasion” in the proposed law, while Senator Farooq H. Naek emphasized that legal language should be clear and easy to understand, and vague clauses should be removed.
FBR Chairman Langrial also disclosed that influential individuals, including a former senator, were involved in tax fraud. Senator Ahmed Khan countered that FBR’s own officials were also complicit in such activities.
