Accountholders information: FBR to propose amendments to Banking Companies Ordinance

The Federal Board of Revenue has decided to propose amendments to the Banking Companies Ordinance 1962 to ensure that secrecy provisions of the banks do not bar the tax officials from exercising their basic right of collecting particulars of the accountholders from banks necessary for documentation of the economy and broadening the tax-base.
Sources told Business Recorder here on Monday that the FBR will also request Finance Minister Dr Abdul Hafeez Sheikh to chair a meeting held with Governor State Bank of Pakistan (SBP), presidents of all banks and Chairman FBR to discuss the issues pertaining to sharing taxpayer's information under the provisions of the Income Tax Ordinance 2001, Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992.
The FBR will request Dr Abdul Hafeez Sheikh to chair this important meeting at the Ministry of Finance with the top management of banks to discuss issue of amassing accountholder's information for expanding the tax net along with documentation of the economy. The major objective of the government to document the economy could be successfully met with the co-operation of banking sector.
Sources said that the FBR has no problem with the secrecy provisions of the 2001, Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992. However, the relevant provisions should not create problems for the tax department for collecting basic information about the accountholders under relevant provisions of the Income Tax Ordinance 2001.
In this connection, the FBR is planning to propose the Ministry of Finance to amend the Banking Companies Ordinance 1962, so that the secrecy laws should not hinder the tax department from collection basic particulars of the accountholders for documentation of the economy and broadening the tax-base. The FBR will also take banking sector into confidence regarding such proposed amendments.
Through Finance Act, 2011, amendments were introduced in Section 165 of the Income Tax Ordinance 2001 wherein the banks now have to divulge complete particulars of their accounts holders by filing of withholding statements. However, the said information is not being provided by the banks on the ground that the secrecy provisions do not allow them to do so.
In case of cash withdrawal from banks under section 231A of the Ordinance 2001, the FBR is facing problem in obtaining particulars of accountholders, who have made withdrawals from banks. In one case of Karachi, the FBR has surprised to see that a person has made cash withdrawals of Rs 2 billion from banks during the year and this information came into the notice of the tax department in the presence of basic data of name/address, etc, of the person available under section 231A of the Ordinance 2001.
Sources said that the secrecy of banks do not compromise on providing taxpayer's data to the tax department. The Board 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 economy.
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.
It has already 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.