FBR officials to gain expanded authority similar to SHO powers

Under the federal budget for fiscal year 2025-26, the Federal Board of Revenue (FBR) is set to flex its muscles with expanded powers, granting it authority similar to that of a station house officer (SHO), enabling it to inspect chartered accountancy and audit firms involved in preparing income tax returns, The Express Tribune reported. 

These inspections will be carried out if discrepancies are suspected in taxpayers’ declarations, ensuring stricter compliance with tax laws.

 The budget also introduces new regulations for individuals purchasing vehicles or immovable property. Buyers will be required to prove that the declared value of the asset is within 130% of their income as declared in the previous year’s tax return. 

A formal application to the FBR will be necessary to confirm that the funds for the purchase, whether in the buyer’s name or that of their spouse or children, have been properly declared in wealth statements.

In a move aimed at enhancing data sharing and enforcement, the proposed legislation allows the FBR to share taxpayer information with commercial banks. These banks will be required to cross-check deposit and investment activities with declared income. If any discrepancies are found, the banks will be obliged to report the customer to the FBR, which can then take enforcement action.

Additionally, the FBR will now have the authority to close unregistered bank accounts, a power previously limited to freezing accounts for tax recovery. This new rule will prevent the operation of unregistered accounts, with banks required to follow FBR directives in this regard.

The proposed amendments to Section 58C of the Income Tax Ordinance will also grant the FBR access to the offices of tax advisers and firms where discrepancies in returns are suspected. This is intended to verify how financial records and returns have been prepared.

The bill also proposes an expansion of the definition of sales tax fraud, making it applicable to anyone found aiding or abetting in tax fraud, with legal prosecution as a consequence. To further tighten enforcement, the FBR will be authorised to track the movement of goods like sugar through an enhanced cargo tracking system, ensuring compliance with tax regulations.