FBR to recover disputed taxes from bank accounts

The Federal Board of Revenue (FBR) on Monday again allowed its officers to forcefully recover disputed taxes from bank accounts of taxpayers, withdrawing over two-year old instructions that had been issued to bar taxmen from taking money without prior intimation to the account holders.

The fresh instructions would likely dent Finance Minister Shaukat Tarin’s pro-taxpayers posture while former FBR chairman Shabbar Zaidi has also publicly aired his frustration against the move. The first order that Zaidi, in his capacity as chairman FBR, had issued was to stop the FBR from attaching the bank accounts.

The FBR withdrew the May 2019 instructions that “no bank accounts attachment unless the taxpayer’s chief executive officer/principal officer/owner is informed at least 24 hours prior to attachment and the chairman FBR’s approval is obtained”, according to FBR instructions issued on Monday.

“In order to implement in its true spirit and to re-vest the power vested in the institution of the Commissioners viz-a-viz action under section 140 of the Income Tax Ordinance 2001, the instructions referred supra are hereby withdrawn ab-initio,” said the FBR.

Dr Asad Tahir, FBR spokesman, confirmed that the May 2019 instructions had been withdrawn but he did not comment on the question about its implications on the finance minister’s pro-taxpayers policies.

The May 2019 orders had closed the shops of many consultants and legal experts and they would now be the happiest people after withdrawal of my instructions, Zaidi said while talking to The Express Tribune.

He noted that the May 2019 instructions had reduced tax-related litigation.

“I am personally sorry to hear the withdrawal of the first instruction issued when I joined as chairman FBR”, Zaidi tweeted while airing his frustration.

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He urged the premier, finance minister and FBR chairman to reinstate the May 2019 instructions.

The business community had welcomed the 2019 decision not to attach the bank account of any business house without prior notice. Under pressure to meet their monthly tax targets, the taxmen used to create demands, sometimes without solid grounds, and recover the sum from their bank accounts by using extraordinary powers.

A senior chief commissioner of a large field formation said that the May 2019 instructions were applicable only to the extent of regional tax offices, as the large tax units had already been exempted from those instructions.

He said the FBR had decided last week that no adverse action would be taken against a taxpayer until his appeal was rejected by a tax tribunal. However, the FBR has not yet issued written instructions regarding not attaching the bank accounts, if the commissioner appeal gives a decision against the taxpayer.

In recent months, the taxpayers have been complaining about the “highhandedness” by the FBR. The matter has also landed in the Senate Standing Committee on Finance that last week recommended the government to sack taxmen who made exaggerated tax demands and then rejected appeals of taxpayers under pressure from FBR headquarters.

The Senate Standing Committee on Finance gave a unanimous recommendation amid a sharp increase in tax assessment orders by the FBR against the taxpayers. This resulted in a 70% increase in litigation in relation to tax matters and the disputed amount jumped to over Rs3 trillion within eight months.

At the end of December 2020, Rs1.8 trillion was stuck in litigation, which has gone up to Rs3 trillion, an increase of Rs1.2 trillion in just eight months, according to FBR data. Eight months ago, about 76,700 cases were under litigation from commissioner appeals in the Supreme Court, which have now increased to nearly 90,000.

About 60% of the disputed tax amount is pending with the commissioner appeals, which is also a reason for bringing them under the FBR control.

The FBR had also issued instructions to the Commissioners Appeals about justifying their decisions in the tax cases before the Member Inland Revenue Operations. However, after a story appeared in The Express Tribune, the FBR had withdrawn the controversial orders at the week.

“The FBR has further clarified that in view of the increasing workload of the Commissioners IR (Appeals), the said letter is also being withdrawn to allow them to concentrate more on timely disposal of pending appeal cases,” a statement issued by the FBR at the weekend said.