Govt considers action against banks to gain access to data
To enhance tax base, FBR seeks information about account holders; banks refuse
To enhance tax base, FBR seeks information about account holders; banks refuse. PHOTO: FILE
ISLAMABAD:
As pressure mounts to broaden the tax base, the federal authorities on Friday reviewed the possibility of taking serious action against commercial banks for their continuous refusal to provide information about their accountholders.
The Tax Reforms Implementation Committee (TRIC), which met under the chairmanship of Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan, held a detailed discussion on the forensic audit of commercial banks and their refusal to give the Federal Board of Revenue (FBR) online access to their accountholders.
Banks were also not sharing details of people who paid different kinds of taxes on banking transactions, effectively preventing the FBR from taking any meaningful action. Since 2013, the banks have been refusing to provide these details.
Committee members did not specify the action to be taken against banks and decided that the FBR chairman would hold a final meeting with the State Bank of Pakistan and Pakistan Banking Association before taking any steps.
Under Section 165 of the Income Tax Ordinance, the banks are bound to share the details of tax collected from a person including his Computerised National Identity Card number and the value of transactions.
Under Section 165-A, the banks are also bound to provide the FBR online access to their central database containing details of the accountholders. However, they have not met the legal requirements since 2013 when the amendment was introduced in the law.
The federal government has levied 0.4% tax on banking transactions above Rs50,000 carried out by non-filers of income tax returns aimed at forcing them to come into the tax net. But people are unwilling to come into the tax net.
Recently, Prime Minister Shahid Khaqan Abbasi directed the FBR to use the transactions data to broaden the tax base. Chief of Army Staff General Qamar Javed Bajwa has also publicly expressed concern over the abysmal tax base.
Sources said Abbasi directed Akhtar to play a pivotal role as FBR officials were not working on those areas which could help broaden the base including real estate and tobacco.
As of October 20, only 415,000 people filed their tax returns with only 10 days left before the end of the extended deadline. This suggests that the FBR has to make a lot of efforts to target big sectors like banks and telecommunication companies.
While banks are reluctant to provide information to Pakistani authorities, they are willingly sharing details about US taxpayers with the SBP for onward transmission to the US regulators.
Under the Foreign Account Tax Compliance Act (FATCA), the US regulators get cross-border tax information related to the US taxpayers. FATCA regulations require the tax authorities to collect detailed account information for US taxpayers on an annual basis.
Finance Minister Ishaq Dar also held a meeting with TRIC members and discussed further upgrade of the tax system, according to the finance ministry.
Leading chartered accountant Ashfaq Tola and renowned advocate Abid Shahban also attended the meeting.
Dar said the government had resolved to implement the proposed reforms, which led to the establishment of TRIC. The committee should also categorise different proposals having immediate, short and long-term implications, he suggested.
TRIC reviewed the decision of introducing electronic monitoring of tobacco products through the stamp, track and trace system at the manufacturing and supply chain stages. It had unanimously taken the decision in March 2017 but it could not be implemented due to resistance by vested interests.
FBR Chairman Tariq Pasha told TRIC that he had met with the stakeholders to resolve the issues. Another meeting would be held and after that new timelines would be finalised for implementation of the electronic system, he said.
The electronic system is aimed at preventing revenue leakages due to under-reporting of production and sales and to ensure proper payment of taxes and duties.
Published in The Express Tribune, October 21st, 2017.
As pressure mounts to broaden the tax base, the federal authorities on Friday reviewed the possibility of taking serious action against commercial banks for their continuous refusal to provide information about their accountholders.
The Tax Reforms Implementation Committee (TRIC), which met under the chairmanship of Special Assistant to the Prime Minister on Revenue Haroon Akhtar Khan, held a detailed discussion on the forensic audit of commercial banks and their refusal to give the Federal Board of Revenue (FBR) online access to their accountholders.
Banks were also not sharing details of people who paid different kinds of taxes on banking transactions, effectively preventing the FBR from taking any meaningful action. Since 2013, the banks have been refusing to provide these details.
Committee members did not specify the action to be taken against banks and decided that the FBR chairman would hold a final meeting with the State Bank of Pakistan and Pakistan Banking Association before taking any steps.
Under Section 165 of the Income Tax Ordinance, the banks are bound to share the details of tax collected from a person including his Computerised National Identity Card number and the value of transactions.
Under Section 165-A, the banks are also bound to provide the FBR online access to their central database containing details of the accountholders. However, they have not met the legal requirements since 2013 when the amendment was introduced in the law.
The federal government has levied 0.4% tax on banking transactions above Rs50,000 carried out by non-filers of income tax returns aimed at forcing them to come into the tax net. But people are unwilling to come into the tax net.
Recently, Prime Minister Shahid Khaqan Abbasi directed the FBR to use the transactions data to broaden the tax base. Chief of Army Staff General Qamar Javed Bajwa has also publicly expressed concern over the abysmal tax base.
Sources said Abbasi directed Akhtar to play a pivotal role as FBR officials were not working on those areas which could help broaden the base including real estate and tobacco.
As of October 20, only 415,000 people filed their tax returns with only 10 days left before the end of the extended deadline. This suggests that the FBR has to make a lot of efforts to target big sectors like banks and telecommunication companies.
While banks are reluctant to provide information to Pakistani authorities, they are willingly sharing details about US taxpayers with the SBP for onward transmission to the US regulators.
Under the Foreign Account Tax Compliance Act (FATCA), the US regulators get cross-border tax information related to the US taxpayers. FATCA regulations require the tax authorities to collect detailed account information for US taxpayers on an annual basis.
Finance Minister Ishaq Dar also held a meeting with TRIC members and discussed further upgrade of the tax system, according to the finance ministry.
Leading chartered accountant Ashfaq Tola and renowned advocate Abid Shahban also attended the meeting.
Dar said the government had resolved to implement the proposed reforms, which led to the establishment of TRIC. The committee should also categorise different proposals having immediate, short and long-term implications, he suggested.
TRIC reviewed the decision of introducing electronic monitoring of tobacco products through the stamp, track and trace system at the manufacturing and supply chain stages. It had unanimously taken the decision in March 2017 but it could not be implemented due to resistance by vested interests.
FBR Chairman Tariq Pasha told TRIC that he had met with the stakeholders to resolve the issues. Another meeting would be held and after that new timelines would be finalised for implementation of the electronic system, he said.
The electronic system is aimed at preventing revenue leakages due to under-reporting of production and sales and to ensure proper payment of taxes and duties.
Published in The Express Tribune, October 21st, 2017.