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In a major policy shift regarding the FBR tax fraud arrest procedure, the Federal Board of Revenue (FBR) can no longer arrest businessmen in tax fraud cases without first consulting two business community representatives.
According to the report published by the Express Tribune, the FBR issued Sales Tax General Order (STGO) No. 2 of 2025, introducing strict conditions before any arrest can take place.
The move is seen as a significant rollback of the arrest powers granted to tax officials in the federal budget.
According to the new order, an arrest cannot be made until an inquiry is completed. Even then, the Commissioner Inland Revenue must secure approval from the Member Inland Revenue Operations.
However, this approval can only be sought after consulting two notified trade representatives and convincing them that the case justifies an arrest.
This extra layer of approval is expected to delay or block most arrests, making actual enforcement nearly impossible.
The order further requires that representatives be chosen from trade bodies nominated by the FBR, and that they must be compliant and credible taxpayers.
Additionally, no single trade organization can have more than one representative per region. Based on these nominations, the FBR will form two-member trader consultation committees for each region. The FBR has listed major trade bodies including:
- Pakistan Business Council
- Federation of Pakistan Chambers of Commerce and Industry (FPCCI)
- Karachi, Lahore, Islamabad, Rawalpindi, and Quetta Chambers
- All Pakistan Textile Mills Association (APTMA)
- Faisalabad, Multan, Sialkot, and Gujranwala Chambers
- Overseas Investors Chamber of Commerce and Industry
Despite gaining broad arrest powers earlier through the budget, the government has now walked back key enforcement tools.
The decision came after strong backlash from traders and resistance from coalition partner Pakistan Peoples Party (PPP), which had compared the FBR’s powers to those of National Accountability Bureau (NAB).
While the government initially aimed to generate Rs389 billion in revenue through tough enforcement measures, recent compromises have watered down these efforts.
Tax officials informed Prime Minister Shehbaz Sharif this week that these reversals represent a major enforcement setback.
Read More: FBR demands real value of property in tax returns 2025
Originally, the FBR was empowered to ban major purchases like cars, homes or plots for non-filers, disallow expenses over Rs200,000 paid in cash and arrest tax defaulters and violators.
However, this week’s three separate notifications have effectively rolled back those enforcement steps. For example, cash expenses are now allowed if the buyer deposits the amount directly into the seller’s bank account, even if done in cash.
Furthermore, the government has postponed its plan to ban ineligible individuals from purchasing assets and making stock market investments. This change, according to officials, has undermined earlier efforts to target the untaxed wealthy class.
