Tax Reform Commission (TRC) has recommended the Federal Board of Revenue (FBR) to introduce a Secrecy Act to ensure secrecy/confidentiality to the information of accountholders in banks. Sources told Business Recorder here on Wednesday that the TRC has submitted budget proposals relating to the section 165A of the Income Tax Ordinance 2001.
The information by banks subsequent to Finance Act 2014 the banks are required to provide FBR with direct and online real time access to the central data base of their accounts holders and all transaction and also to submit to FBR the particulars of accounts where deposit of Rs 1 million or more has been made in a calendar month and details of credit card holders aggregating transaction of Rs 100,000 or more in a calendar month.
It is recommended to make this process efficient, appropriate changes in other laws should also be made after following due process. Stakeholders should be taken into confidence which make the scheme beneficial. The introduction of Secrecy Act be considered that will definitely be a confidence booster to the general public.
Owing to peculiar security situations and confidentiality issues, banks are quite apprehensive about implementation of such requirements and have challenged the implementation of this section in court of law. Such steps can result in increasing the base of cash based undocumented transaction, decrease in formal savings and flow of funds to undocumented sector, TRC added. TRC recommended amendments in the Seventh Schedule - Banking Companies of the Income Tax Ordinance 2001. Referring to the Rule 1(c), TRC said that the provision for advances and off balance sheet times to be allowed to the extent of 1% of total advances and 5% of the total advance in case of small and medium enterprise (SME).
The clause may be amended as under: Provisions for advances and off balance sheet items shall be allowed upto a maximum of 1% of total gross advances (excluding advances to SME); and provisions for advances and off-balance sheet items shall be allowed at 5% of total gross advances for relating to consumers and small and medium enterprises (SMEs) (as defined under the State Bank Prudential Regulations)] provided a certificate from the external auditor is furnished by the banking company to the effect that such provisions are based upon and are in line with the Prudential Regulations. Provisioning in excess of 1% of total advances for a banking company and 5% of total advances for consumers and small and medium enterprises (SMEs)] would be allowed to be carried over to succeeding years:
Provided that if provisioning is less than 1% of total gross advances, for a banking company then actual provisioning for the year shall be allowed: Provided further that if provisioning is less than 5% of advances for relating to consumers and small and medium enterprises (SMEs) then actual provisioning for the year shall be allowed and this provisioning shall be allowable from the first day of July, 2010.
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