FBR receives data of withholding taxes from banks

• People asked to disclose undeclared bank accounts under amnesty scheme by June 30

ISLAMABAD: The Federal Board of Revenue (FBR) has received details of all bank accounts from which withholding tax is being deducted and scrutiny is being conducted to bring the non-filers into the tax base.

In a statement, the tax watchdog stated that non-filers could avail the amnesty scheme to disclose their undeclared bank accounts, reminding people that the deadline for the amnesty would expire on June 30.

Per details, the withholding tax details from all banks is being added to the data bank developed with the help of NADRA [National Database Registration Authority].

The data bank developed with the help of NADRA possessed all kinds of data about potential non-filers but it lacked banks data. The FBR is now confident that the data of withholding deductions would help the tax machinery in launching a pilot project from July 1, 2019 for broadening of the tax base.

When the FBR wrote letters to all banks for sharing minutes of meeting held with them they also sent out official communication to the State Bank of Pakistan for information to the regulator. The SBP in its reply told the FBR that the central bank did not possess data of customers but the FBR could obtain it directly from the banks under the Income Tax law.

Section 165A of Income Tax Ordinance enables the FBR to get the data from the banks. The section 165A of Income Tax Ordinance 2001 states that notwithstanding anything contained in any law for the time being in force including but not limited to the Banking Companies Ordinance, 1962 (LVII of 1962), the Protection of Economic Reforms Act, 1992 (XII of 1992), the foreign Exchange Regulation Act, 1947 (VII of 1947) and the regulations made under the State Bank of Pakistan Act, 1956 (XXXIII of 1956), if any, on the subject every banking company shall make arrangements to provide to the Board in the prescribed form and manner,— (a) online access to its central database containing details of its account holders and all transactions made in their accounts; (b) a list containing particulars of deposits aggregating rupees one million or more made during the preceding calendar month; (c) a list of payments made by any person against bills raised in respect of a credit card issued to that person, aggregating to rupees one hundred thousand or more during the preceding calendar month; (d) a consolidated list of loans written off exceeding rupees one million during a calendar year; and (e) a copy of each currency transactions report and suspicious transactions report generated and submitted by it to the Financial Monitoring Unit under the Anti-Money Laundering Act, 2010 (VII of 2010).

(2) Each banking company shall also make arrangements to nominate a senior officer at the head office to coordinate with the Board for provision of any information and documents in addition to those listed in sub-section (1), as may be required by the Board. (3) The banking companies and their officers shall not be liable to any civil, criminal or disciplinary proceedings against them for furnishing information required under this Ordinance. (5) Subject to section 216, all information received under this section shall be used only for tax purposes and kept confidential.

Earlier it was reported that the government’s decision to peep into bank accounts of all those having more than Rs500,000 balance with a view to bringing them into the tax net had faced a jolt after the SBP refused to provide the information on account of ‘secrecy laws’.

The FBR had sought the cooperation from the central bank after it found out that hardly 10% of over 50 million bank account holders were income tax filers. “The existing legal framework provides constraints on procuring and sharing of privilege/confidential information relating to the affairs of the banks’ customers,” the SBP wrote to the FBR.

The communique has been sent to the FBR by the banking policy and regulation department of the SBP. The central bank has long been accused of protecting the interests of the banks, often at the expense of the national exchequer. Also, the central bank could not timely detect the Benami transactions, allegedly being carried out by politicians despite the fact it regularly conducts an audit of the banks.

The FBR received the central bank refusal letter the day it directed its field formations to go all-out against those who are not the income tax return filers after Prime Minister Imran Khan once again snubbed the tax machinery for its poor performance.

The FBR has faced record revenue shortfall of Rs440 billion during the first 11 months of the outgoing fiscal year and its tax-to-GDP ratio is feared to slip to even below 10% by this June. The FBR headquarters had directed its field formations to examine the data of bank account holders above the threshold of Rs500,000 with the assistance of the central bank.

FBR Chairman Shabbar Zaidi held a meeting with the chief finance officers of the commercial banks. He asked the banks to provide the data of the withholding taxes in the first stage. The banks had raised concerns about the confidentiality of their account holders but they agreed to provide the data of the withholding taxes with effect from January 2018 with CNIC to the FBR by June 17.

The FBR chairman also urged the banks to provide the details of the benami accounts. The banks have agreed to write letters to their account holders having a balance of Rs500,000 and above as of April this year, asking them to avail the amnesty scheme if the accounts are not declared by the customers.