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Access to bank accounts

Access to bank accounts

According to newspaper reports, the Lahore High Court (LHC) has allowed the Federal Board of Revenue (FBR) to access the database of commercial banks.

Earlier, the FBR had added section 165A to the Income Tax Ordinance 2001 through the Finance Act 2013, giving the tax authorities access to the accounts profiles of the accountholders.However, the LHC had suspended implementation of the newly added section on the appeal of various commercial banks. Now after the permission of the court, one of the two hurdles,which had kept the bank deposits out of the reach of tax authorities, has been removed. However, the stay order by the Sindh High Court against Section 165A is still in place, but it has suspended 5 percent tax on bonus shares as the government was trying to collect Rs1.5 trillion on this account.

The federal government had amended the Banking Companies Ordinance 1962, Protection of Economic Reforms Act 1992, Foreign Exchange Regulation Act 1947 and regulations made under the State Bank of Pakistan Act 1956 by inserting Section 165A to the Income Tax Ordinance2001 to trace tax evasion. Under the section, the banks are required to provide a list of transactions made by any person against bills through credit card aggregating Rs100, 000 a month and details of deposits aggregating Rs1 million or more during the preceding month. A statutory obligation compels the banks to give the FBR online access about the financial details of the accountholders and transactions made by them as well as a consolidated list of written-off loans exceeding Rs 1 million.

It is unfortunate that just over 800,000 individuals and companies have filed their income tax returns up to now, the number which is less than even the last year’s returns. The wheel of industry has slowed down amid less tax collections and energy crisis. The prime revenue authority is already trying to meet a condition of the International Monetary Fund by collecting Rs 1.195 trillion before the end of this month. The tax to GDP ratio is pretty low in Pakistan, but banks are generally show their reluctance to give the tax authorities access to accountholders deposits.

On another note, an atmosphere of fear and anxiety prevails among the business community on the issue of their bank profiles. There is no dearth of honest officers in the government departments, but presence of black sheep also cannot be denied. There is a need to develop such mechanism which should prod the business community to voluntarily allow access of their bank accounts to the tax authorities without coercion and compulsion.