Karachi Regional Tax Office (RTO) has once again issued notices to the banks, forwarding names/national tax numbers (NTNs) of 331 freight forwarders to obtain information about remittances made by these service providers to non-resident companies abroad.
Sources told Business Recorder on Saturday that the RTO has issued third time notices to certain banks with list of freight forwarders to seek information under section 176 of the Income Tax Ordinance 2001. The RTO Karachi has obtained the list from the website of the association ie Pakistan International Freight Forwarders Association.
According to Karachi RTO notice dated February 10, section 176 of the Income Tax Ordinance 2001 empowers the Commissioner to collect information from any person, and income tax law overrides all other laws for the time being in force. The objections of the banks regarding section 33A of the Banking Companies Ordinance 1962 and Circular 13 of 1991 have already been addressed. It has been once again requested to furnish information in respect of all remittances excluding remittances from private sector currency accounts or those remittances which are protected under PEPA 1992.
The RTO has enclosed list of freight forwarders who have made payments to non-residents. The full details of members of freight forwarders are available on the website of the association. This information is required under section 176 of the Income Tax Ordinance 2001 delegated to Assistant Commissioner of Inland Revenue by the Commissioner Inland Revenue Audit Division-III RTO Karachi failing which action will be taken as per law. The compliance of this information is requested to be submitted by the banks on or before February 20, 2010, the Karachi RTO added.
Responding on the issue, a tax expert said that information of accounts cannot be shared with the third party under section 33A of the Banking Companies Ordinance, 1962 and Protection of Economic Reforms Act, 1992. When banks showed reluctance in giving information about their account holders in general form; the RTO has now issued notice to the banks asking for information about some of the freight forwarders by giving specific names. However, no details about the branch or account numbers have been given. The department has accepted that the information from banks can be asked in specific circumstances and the directions issued by the FBR are valid and binding.
On the other hand, the banks might not be able to provide this information, the reason being that it is not possible to identify an account by name only or national tax number. The identification of accounts by name is a difficult task because there may be one or more accounts in the same name. Therefore, at least the branch name or some other identification must be given by the tax authorities. Even if the name given by the RTO and the account title with the bank matches, it is not necessary that the accountholder is the relevant freight forwarder whose information is required by tax department. It is also being considered by the banks as to whether giving information in specified format would in any way be against the provisions of Section 33A of the Banking Companies Ordinance, 1962 and Section 9 of the Protection of Economic Reforms Act, 1992. The legal representatives of some banks are also analysing level of penalty being imposed by the tax department as compared to penalty being imposed by regulator ie, State Bank of Pakistan for violating banking laws.
The banks have approached the Pakistan Banks Association (PBA) to take up the matter with the SBP for an immediate resolution of the issue, which is a great cause of concern for the banks, the tax expert added.