The Federal Board of Revenue (FBR) has managed to convince the banking sector to submit required information of their accountholders in the monthly withholding statements to facilitate the tax department in documentation of the economy.
Sources told Business Recorder here on Tuesday that FBR Member Shahid Hussain Asad, Member Inland Revenue and the representatives of Pakistan Banks Association (PBA) had discussed the crucial issue of filing of monthly withholding statements by banks.
Tax authorities have informed the bank representatives that banks can play an important role in increasing revenue collection and improving tax compliance by submitting complete information of their accountholders in the monthly withholding statements under the relevant provisions of the Income Tax Ordinance 2001.
According to sources, it was a major breakthrough in improving co-ordination between the FBR and the banks in proper filing of withholding tax statements according to the Ordinance 2001. The FBR has agreed to introduce necessary changes in the tax laws keeping in view suggestions of the banks. It has also been agreed that all banks will continue to co-operate and comply with the Inland Revenue Service field formations' requirements as stipulated in the law wherein particulars of the account holders, namely computerised national identity card number (CNIC) or account number/title of accounts are conveyed and generalised information is not sought.
According to FBR sources, the PBA underscored the need of respect for the secrecy of the bank accountholders under relevant provisions of the operating laws. They expressed concern over filing of withholding statements wherein the banks now have to divulge complete particulars of their accounts holders in the wake of amendments introduced in Section 165 of the Income Tax Ordinance, through Finance Act, 2011. Member, Inland Revenue, while accepting the PBA's position, in principle, stated that the "days of banking secrecy are over," and in order for Pakistan to move in rhythm with the rest of the world, it had to come out of the traditional paradigm of confidentiality of and by the banking sector even at the cost of the state exchequer. He further desired PBA to cooperate with FBR in the process of nation-building through increase in revenue and improved tax compliance particularly when quite a few of the banks who were providing complete information of the their account holders in the monthly withholding statements had neither faced any litigation nor any extra-legal problems from the side of the tax department. The PBA delegation in unison lent support to Member, Inland Revenue's assertions, but raised their liability concerns including possibility of institution of liability suits against banks for violation of confidentiality provisions/l aws.
Accordingly, it was decided that PBA, within a fortnight, will forward to FBR a complete inventory of laws/provisions/regulations/rules, which in their view, need amendment/modification so as to be consistent with the provisions of the Income Tax Ordinance, 2001, enabling FBR to introduce required changes therein after due diligence and consultations with the stakeholders including the State Bank of Pakistan and the Ministry of Finance. However, in the meantime, all banks will continue to co-operate and comply with the IRS field formations' notices/requirements as stipulated in the law wherein particulars of the account holders, namely CNIC or account number/title of accounts are conveyed and generalised information is not sought.
In connection with the matter of filing of Withholding Statements, it was decided that as soon as all branches of National Bank of Pakistan (NBP) are made to issue CPRs the banks will file them electronically. The banks are required to identify the branches of NBP that are not issuing CPRs due to which their e-statements are rejected at e-portal of FBR. It was further agreed that all technological bottlenecks faced by banks in this connection with filing of e-statements under section 165 shall be brought to the notice of Chief (Operations), FBR, who will get them resolved in consultation with PRAL experts on priority basis, sources added.
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