Banks deny FBR access to foreign currency accounts

Law, however, allows taxmen to seek information about accountholders


Our Correspondent October 27, 2016
Not only this, the fertiliser importing companies have also asked the government to stop the marketing of subsidised DAP as the outstanding payments for the last three months as well as from last year have not been made to them. PHOTO: AFP

ISLAMABAD: Commercial banks are not giving access to tax authorities for the scrutiny of foreign currency accounts despite a law that provides access to these accounts, said a senior official of the Federal Board of Revenue (FBR) on Thursday.

The banks remained reluctant amid an opposition-backed move to stop those citizens from opening foreign currency accounts that had no foreign source of income.

Banks refuse to budge as FBR seeks access to data

“Banks do not allow us to examine foreign currency accounts,” said Rehmatullah Wazir, FBR Member Inland Revenue Policy, while speaking at a meeting of the Senate Standing Committee on Finance.

He was responding to Senator Saleem Mandviwalla’s question whether the FBR could access these accounts to probe tax evasion. In December 1999, the Pervez Musharraf government had withdrawn the immunity from tax-related investigation by introducing an amendment to the Pakistan’s Protection of Economic Reforms Act (PERA) of 1992. However, even after 18 years, the banks have not given access to the FBR.

A senior official of the State Bank of Pakistan told the committee that there were 535,000 individual foreign currency accounts with $6.5 billion in deposits. FBR Chairman Nisar Muhammad Khan insisted that if the FBR had definite information about tax evasion, it could hold investigations into the foreign currency accounts - an assertion that was far from reality.

He could not cite a single case where the FBR got information from the banks over the last 18 years.

Finance Secretary Dr Waqar Masood said the government had introduced an amendment to the Income Tax Ordinance of 2001 to bind the banks to give access to local currency accounts to the FBR. However, the banks had challenged the law in courts.

Amendments

The discussion revolved around amendments proposed by Mandviwalla in the 1992 PERA. The amendments have taken care of genuine foreign currency account holders and are seeking to cut benefits of only those who are transferring billions of dollars abroad without any check.

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Mandviwalla has proposed amendments to Sections 4 and 5. Under Section 4, he proposed that only authorised dealers, foreign branches of Pakistani banks, shipping companies, airlines, insurance corporations incorporated in Pakistan and their subsidiaries, students, exporters and foreign visitors could open these accounts.

He suggested that all other individuals and entities should not hold foreign currency accounts, as these had become a main source of money transfer abroad and tax dodging.

He proposed that Section 5 should be replaced with a new section. This section grants immunity from probe by the tax department, immunity from wealth tax, income tax, zakat deduction, and allows banks to keep information of these account holders secret.

Giving its response, the Ministry of Finance said the standing committee may approve a law to close only those accounts where dollars were deposited after buying from the domestic market. And where the accounts were maintained through foreign sources of income, there should not be any restriction, it said.

The ministry mentioned that in India dollars could not be transferred abroad by purchasing from local sources.  According to data provided by the central bank in August this year, from 2013 through 2015, Pakistanis had sent $5.7 billion abroad through their foreign currency accounts.

Published in The Express Tribune, October 28th, 2016.

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COMMENTS (2)

H.A.Khan | 5 years ago | Reply FBR Member Inland Revenue Policy; Banks do not even allow FBR access to local currency accounts.Please admit, that FBR is dysfunctional and in-effective.
Haji Atiya | 5 years ago | Reply The irony is that local banks are informing foreignl tax authorities of foreign currency accounts held either by non-Pakistani citizens or dual citizens, but not to FBR !
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