Federal Board of Revenue (FBR) has finally penalised some five major banks on the charge of concealing records of some 333 freight forwarders involved in remitting around $920 million to their parent companies during last six years without paying a single penny as tax.
Sources told Business Recorder on Saturday that the Regional Tax Office (RTO), Karachi has issued penalty notices to some five major banks, which are using delaying tactics in providing transactional records of the freight forwarders. They said the banks were of the view that they might not be able to provide the required information, as it is impossible to identify any account by name or national tax number.
The identification of accounts by name is a difficult task, as there may be one or more accounts in the same name. Therefore, at least the branch name or some other lead must be given by the tax authorities. However, the tax officials argued that banks would face no difficulty in providing the relevant information of the freight forwarders, as they have dedicated branches for the purpose.
They further said the representatives of the banks, who had agreed at a meeting convened on January 2, 2010 to facilitate the tax department in this regard, have given the cold shoulder when the notices along with a list of freight forwarders were issued under section 176 of the Income Tax Ordinance (ITO) 2001. Therefore, the tax department has considered them as defaulters under section 176 and issued penalty notices under section 186 of ITO, 2001, they added.
The sources said that some 333 freight forwarders have remitted around $920 million to their parent companies during FY 2004 to FY 2009 without paying single penny as tax.
They said the department has assessed around $250 million as 30 percent of the remitted amount under section 152 of ITO, 2001, according to that, "every person paying an amount of royalty or fees for technical services to a non-resident person that is chargeable to tax under section 6 shall deduct tax from the gross amount paid at the specified rate".
The sources said the tax department is also dispatching notices under section 122 (5A) for analysing the specific records of these freight forwarders for tax year 2007 and 2008.
They said the department has verified that the parent companies of these freight forwarders are established at Kevin Iceland and Virgin Iceland, which are not come under double taxation treaty and considered to be tax heaven. Furthermore, they said, the mandatory requirement of the Security and Exchange Commission of Pakistan (SECP) to disclose all remittances in the specific column of income statement has caused to unearth this tax evasion scam.