ISLAMABAD:
The Federal Board of Revenue (FBR) has decided to approach the law division for interpretation of laws in order to resolve a longstanding dispute with banks over extracting information about account holders.
A senior official of FBR told The Express Tribune that under the Income Tax Ordinance tax officials could obtain information and account details of bank depositors. However, bank officials argue that under the Banking Companies Ordinance they cannot give any information about their account holders to the taxmen.
He said banks also took support of the Protection of Economic Reforms Act 1992 to restrict information about account holders.
FBR wants account details of depositors of banks in an attempt to bring more people under the tax net to increase the tax-to-gross domestic product ratio, meet the annual revenue collection target of Rs1,952 billion and widen documentation of economy.
In the previous fiscal year ended June 2011, FBR had identified 700,000 rich people, who own luxurious houses and frequently travel abroad, but do not pay any tax.
The official said FBR was of the view that the Income Tax Ordinance was above the Banking Companies Ordinance, Protection of Economic Reforms Act and other such laws and it could seek details of bank account holders.
He said FBR, on the advice of consultants, sought the law division’s assistance, asking it to interpret all these laws and give a ruling to clarify whether the tax officials could seek information about bank depositors.
Published in The Express Tribune, August 4th, 2011.
COMMENTS (3)
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The above comments are excellent.
The powers of Inland Revenue Officer (previously Income Tax Officer) are vast and unique. Income Tax Ordinance, 2001 is a special law unlike general law; on the other hand, Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992 are also special laws under whose shelter banks' claim of not complying with the FBR authorities arrive; however, Income Tax Ordinance, 2001 came into effect after Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992 and as per basic principle of interpretation of the statue, the provisions of that law would prevail that was enacted later compared to the other laws; therefore, the provisions of Income Tax Ordinance, 2001 will prevail and banks are legally bound to comply with the Inland Revenue/FBR authorities. Further, under section 3 of Income Tax Ordinance, 2001, it is visibly mentioned that the ordinance has overriding provisions. Furthermore, under section 176 of the law, an Inland Revenue Officer can obtain any kind of information (also from the government departments) even if their respective laws restrict disclosure of information as provided under sub-section 5. To conclude it all, FBR wins.
Protection of Economic Reforms Act 1992 has gone through change and the immunity is no more available.Even the above law provided *Secrecy of bona fide banking transactions . FBR needs to revise their 1992 circulars. No bank can claim immunity for providing protection to huge deposits that are un-declared and un-taxed. Banks de-facto are becoming accessories to this .
Even in USA John doe summons are issued.Such John Doe summons were issued to obtain information about US citizens who had stashed away illegal / un-declared funds in Swiss Banks. http://www.irs.gov/irm/part25/irm_25-005-007.html
What can be done by FBR is negotiate with the Banks that only provide information about deposits of more than say Rs 5 million. If Banks do not provide this information, FBR should audit the Interest paid by the Bank and Tax deducted and obtain this information indirectly.
Let this country get it's due share of taxes.If we do not, we will be in very bad shape.