Scope of recovery from taxpayers extended

The Federal Board of Revenue (FBR) has extended the scope of recovery from taxpayers by empowering Inland Revenue officers to recover tax from money held in bank accounts, fixed deposits, term deposit certificates (TDRs), call deposit receipts (CDRs), employees' salaries and landlords' money held by tenants.

The FBR has issued SRO. 111(I) 2020 here on Monday to issue draft amendments in the Income Tax Rules 2002.

However, the FBR has withdrawn powers of the tax officials to recover tax from money held in bank lockers.

Therefore, recovery may be made from the taxpayers including tax defaulters from their bank accounts, fixed deposits, TDRs, CDRs, salaries of the individuals owed by employers, rent of landlords owed by tenants and debtors owing money of the taxpayers.

According to the draft recovery rules, "where any tax is due under section 137 of the Income Tax Ordinance, the Commissioner may serve a notice upon any person in the prescribed form. Provided that where the power to issue notice of recovery has been delegated by the Commissioner, prior approval of the Commissioner shall be obtained who shall satisfy himself as to the service of order and that no refund due to the defaulter is available for adjustment against the tax demand. He shall also satisfy him that no application for rectification is pending hearing against the demand".

The FBR said that where the tax due is a consequence of an ex-parte order or rejection of estimate, the notice shall be issued after obtaining approval in writing from the Chief Commissioner who shall satisfy himself of the propriety of the service of order.

"Where the taxpayer has preferred an appeal in respect of the order under which the tax sought to be recovered has become payable and the appeal has not been decided by the Commissioner (Appeals), the notice shall be issued after obtaining approval in writing from the Chief Commissioner who shall satisfy himself that the taxpayer has not voluntarily paid ten percent of the said amount of tax," FBR said.

The FBR said that "a copy of the notice shall be forwarded to the defaulter at his last known address, and in case an account or money is held jointly, to all the joint-holders on their last known address.

"The person shall remit or send the money to the Commissioner through pay

order or demand draft or through banking transfer or cheque for payment to the government treasury on the same day the notice is served ,or, in case the money is to become due for payment to the defaulter at a future date, on the same day it becomes due. Provided that where the person is liable to make a series of payments to the taxpayer, the Commissioner may specify the amount to be paid out of each payment until tax due has been paid".

The FBR added that "the recovery of tax shall be made only to the extent of tax due by the taxpayer. Provided that in case the money is held jointly with any person other than the defaulter, the shares of the joint-holders in such account shall be presumed, until the contrary is proved, to be equal. Every person to whom a notice is issued shall be bound to comply with such notice, and, in particular, where any such notice is issued to a post office, banking company or an insurer, it shall not be necessary for any pass book, deposit receipt, policy or other document to be produced for the purpose of any entry, endorsement, or the like being made before payment is made, notwithstanding any rules, practice or requirement to the contrary".

The FBR added that "where at the time of recovery of tax on an order, it is established that the tax that was to be recovered from the person has meanwhile been paid by the defaulter, no recovery shall be made from the person but the said person shall be liable to pay default surcharge at the rate provided from the date he failed to comply with the notice".