LAHORE: The Lahore Chamber of Commerce and Industry (LCCI), along with representatives of various trade and industrial associations, on Friday strongly rejected Section 37AA of the Income Tax Ordinance, branding it a “black law” that poses a serious threat to the country’s business environment.

Addressing a press conference at the LCCI, President Mian Abuzar Shad, Vice President Shahid Nazir Chaudhry, and former presidents Mian Anjum Nisar and Muhammad Ali Mian, flanked by leaders from multiple trade bodies, demanded the immediate repeal of the clause.

Mr Shad said Section 37AA grants sweeping powers to the Federal Board of Revenue (FBR) officials, allowing them to arrest any taxpayer on mere suspicion of tax fraud without the need for concrete evidence. “This clause is nothing short of a sword hanging over the heads of the entire business community,” he said.

He noted that the definition of tax fraud had already been widened considerably in recent years, encompassing everything from clerical errors to legal misinterpretations. “Now, this clause hands unchecked authority to FBR officials, paving the way for harassment and misuse of power,” he added.

Term Section 37AA a ‘black law’ that will undermine investment, economic goals

He warned that such legislation violates basic principles of justice and constitutional protections, eroding trust in the tax system and deterring both local and foreign investors. “Businesses operate on reputation. Arrests on flimsy grounds can damage credibility and disrupt operations irreparably,” he said.

Following widespread backlash, the government amended the clause to stipulate that arrests would only be permitted in cases involving a tax loss exceeding Rs50m and subject to the approval of a three-member committee. However, Mr Shad said the amendment was merely cosmetic and failed to address the core issue.

“Even with the amendment, the clause remains draconian. Empowering tax officials to order arrests without judicial oversight is wholly unacceptable,” he asserted.

Vice President Shahid Nazir Chaudhry echoed these concerns, stating that the business community has consistently advocated for growth-oriented, investment-friendly policies. “Measures like Section 37AA will only exacerbate the challenges already facing our economy. Entrepreneurs will shy away, and capital flight will increase,” he said.

Former presidents Mian Anjum Nisar and Muhammad Ali Mian urged the government to withdraw the clause without delay. “With a GDP growth target of 4.2pc and an export target of $35.3bn, the government cannot afford to alienate the business community. Laws like this will only make these targets harder to reach,” they said.

Representatives of trade and industrial associations present at the press conference voiced unanimous and strong opposition to the clause.

Published in Dawn, June 28th, 2025