FBR Can Now Arrest Company Directors, CEOs and CFOs

The Federal Board of Revenue (FBR) in Pakistan has recently been granted new powers. Now its Inland Revenue officers are allowed to arrest company directors, Chief Executive Officers (CEOs), and Chief Financial Officers (CFOs), as well as individuals who abet tax fraud. This shift in the FBR’s enforcement capabilities is aimed at reducing tax evasion and ensuring greater compliance.

These extraordinary powers were officially conferred upon Inland Revenue officials through the Finance Bill (2025-26). This legislative change empowers FBR officers to take direct action against individuals holding key positions within companies if there is reason to believe they are involved in tax fraud or other offences under tax laws. The new powers specifically target company directors, CEOs, CFOs to hold accountable those at the helm of corporate entities.

An officer of the Inland Revenue can initiate an arrest during an investigation. But the officer must have “reason to believe” that the actions of the individual in question may have caused or attempted to cause tax fraud or any other offence warranting prosecution.

A significant safeguard embedded in this new authority is the requirement for prior approval of the Commissioner before an arrest can be made. This ensures that the power is not exercised arbitrarily and that a higher authority reviews the grounds for arrest.

By holding senior management directly accountable, the FBR aims to create a stronger deterrent against illicit financial activities and non-compliance.

While intended to combat fraud, there’s potential for misuse of these powers, emphasizing the importance of the “prior approval” mechanism. It remains to be seen if these new powers will face legal challenges or if the FBR will issue detailed guidelines to ensure their judicious application.