Tax declarations: NA body rejects proposal seeking info sharing

ISLAMABAD: National Assembly Standing Committee on Finance Friday has rejected a major amendment in Finance Bill 2026 under which the Federal Board of Revenue (FBR) may share tax declarations’ information with the State Bank of Pakistan (SBP) for cross matching with the SBP’s Central Data Repository.

While reviewing the amendments proposed in section 175AA (exchange of banking and tax information related to high risk persons), the committee endorsed the enabling provision to allow the SBP to establish, operate and maintain a secure centralised virtual repository of banking data, comprising such information, records, and financial transactions of persons maintained by Scheduled banks.

The Committee also stopped the FBR from incorporating another amendment to allow the central bank, Microfinance banks, and Electronic Money Institutions (EMIs) to provide final results to the FBR on banking data based on algorithms.

MNA Sharmila Faruqui expressed apprehensions about the possible misuse of taxpayers’ data.

Director General Tax Policy Unit (TPU) Dr. Najeeb Memon responded that the analysis of returns is done on the basis of compliance risk management system. The taxpayers’ data of gross mismatch would remain confidential, he added.

He explained that the purpose of the proposed amendments in the section 175AA of the Income Tax Ordinance 2001 is to question those taxpayers who are engaged in huge banking transactions, but not filing their income tax returns.

MNA Hina Rabbani Khar objected that the government is making banks part of tax investigations against the taxpayers. The FBR is investigating taxpayers and now banks would also do the same kind of investigation.

Chairman of the committee Naveed Qamar stated that the amendment to create a centralised virtual repository of banking data by the SBP will be retained whereas rest of the amendments in the section 175AA would be abolished.

FBR Member (Strategic Transformation) Dr. Hamid Ateeq Sarwar stated that nearly Rs37 trillion, available in bank accounts, are under circulation. How, we can go after those persons, doing huge transactions, but not filing their income tax returns? Around 76 percent of the tax is paid by big companies. Can we continue to rely only on the corporate sector? In the absence of cross matching of banking data, how we can catch these individuals, he questioned.

The committee approved most of the amendments relating to the offences and penalties with some modifications.

On the issue of substantial raise in penalty (late-filing) from Rs1,000 to Rs25,000 in case of individual, committee members objected that the FBR should not penalise genuine late filers of returns.

FBR Member (Strategic Transformation) Dr. Hamid Ateeq Sarwar explained that the main target of this penalty are those individuals, who are filing returns to avoid heavy fines/penalties of non-filing during purchase of immovable properties and cars. People file returns only to purchase properties and avoid enhanced withholding tax rates. Genuine late filers have 15 days grace period and then another 15 days i.e. total 30 days to file returns after due date. On filing of application, the extension in return filing is done automatically. The “legally disabled persons” are also not liable to penalty.

Chairman of the Finance Committee stated that on one hand, the FBR is pursuing people to file returns. On the other hand, huge increase in penalties has been proposed in the Finance Bill 2026.

Naveed Qamar repeatedly questioned how the FBR can differentiate between genuine late filer and others intended to purchase properties. How can the FBR impose the same huge penalty on a genuine later filer as compared to individuals, who filed return to purchase properties?

After detailed discussion, it was agreed that an explanation would be added that enhanced late-filing penalties would not be applicable on late-filers provided they would not purchase immovable properties for three months from the date of becoming active taxpayer.

Copyright Business Recorder, 2026