National Assembly panel rejects FBR plan to share tax declaration data with State Bank

The National Assembly Standing Committee on Finance and Revenue on Friday rejected a major amendment in the Finance Bill 2026 that would have allowed the Federal Board of Revenue to share tax declaration information with the State Bank of Pakistan for cross-matching with the central bank’s Central Data Repository.

While reviewing proposed amendments to Section 175AA of the Income Tax Ordinance, 2001, the committee endorsed an enabling provision allowing the State Bank of Pakistan to establish, operate and maintain a secure centralised virtual repository of banking data.

The repository will contain information, records and financial transactions of persons maintained by scheduled banks.

However, the committee stopped the FBR from incorporating other amendments that would have allowed the SBP, microfinance banks and Electronic Money Institutions to provide final results to the tax authority on banking data through algorithms.

Pakistan Peoples Party MNA Sharmila Faruqui raised concerns over possible misuse of taxpayers’ data.

Director General Tax Policy Unit Dr Najeeb Memon said analysis of returns would be carried out through the compliance risk management system and that taxpayers’ data involving gross mismatches would remain confidential.

He said the proposed amendments were aimed at identifying persons carrying out large banking transactions while not filing income tax returns.

MNA Hina Rabbani Khar objected to the proposal, saying the government was making banks part of tax investigations against taxpayers. She said the FBR was already investigating taxpayers, and banks should not be drawn into the same process.

Committee Chairman Naveed Qamar said the amendment allowing the SBP to create a centralised virtual repository of banking data would be retained, while the remaining proposed amendments to Section 175AA would be removed.

FBR Member Strategic Transformation Dr Hamid Ateeq Sarwar said nearly Rs37 trillion available in bank accounts was under circulation and questioned how authorities could pursue persons making large transactions but not filing returns without cross-matching banking data.

He said around 76% of tax was paid by large companies and questioned whether the country could continue relying mainly on the corporate sector.

The committee also approved most amendments related to offences and penalties with some changes.

Members objected to the proposed increase in the late-filing penalty for individuals from Rs1,000 to Rs25,000, saying the Federal Board of Revenue should not penalise genuine late filers.

Dr Hamid Ateeq Sarwar said the higher penalty was aimed at individuals who file returns only to avoid higher taxes and penalties while purchasing immovable properties or vehicles.

He said genuine late filers already had a 15-day grace period and another 15 days after the due date, giving them 30 days to file returns. He added that extensions were granted automatically upon application and that legally disabled persons were not liable to the penalty.

Naveed Qamar said the Federal Board of Revenue was encouraging people to file returns on one hand while proposing a steep increase in penalties on the other.

He repeatedly questioned how the tax authority would distinguish genuine late filers from those filing returns only to purchase property.

After detailed discussion, the committee agreed that an explanation would be added to provide that enhanced late-filing penalties would not apply to late filers if they do not purchase immovable property for three months from the date they become active taxpayers.