FTO launches probe into ‘unlawful’ compulsion on non-residents to file returns

ISLAMABAD: The Federal Tax Ombudsman (FTO) of Pakistan has launched a probe to know why non-resident Pakistanis are being compelled ‘unlawfully’ to file tax returns prior to open foreign currency bank account, The News learnt on Tuesday.

“Such treatment is prima facie in violation of the express provisions of section 114 of the Income Tax Ordinance, 2001 whereby the non-residents are not under an obligation to file return of their foreign income,” FTO said.

The FTO sent the matter for comments to the secretary of the Revenue Division.

The Federal Board of Revenue (FBR) contended in a reply that a non-resident was not required to be a ‘filer’. The banks might have some internal administrative issues in opening the bank account, “which can only be resolved by the SBP (State Bank of Pakistan),” the FBR said.

The Deputy Director SBP in a statement to the FTO last month said the banks had been directed to follow the law.

“It has come to our notice that some authorised dealers are not allowing non-residents to open and maintain foreign currency accounts on the pretexts that they are not appearing as filers in the active taxpayer’s list (ATL) of the FBR,” the SBP said in a direction to the banks. “Instructions contained in the Income Tax Ordinance, 2001, are not applicable to non-residents.”

The FTO took the action, exercising powers of own motion against systemic maladministration. The FBR managed to have 1.96 million for the tax year 2018 which, albeit up from 1.84 million from the tax year 2017, is small compared to the country’s population of over 200

The apex tax authority is expecting the number of return filers to cross two million by June 30 if the government implements local and foreign assets declaration scheme, which awaits final touchups.

The FBR received around 78,000 income tax returns in the amnesty scheme for local and foreign assets introduced last year.

The returns filing has been made mandatory to be included in the ATL and which is important for availing reduced rates of withholding tax in making certain financial transactions.

The FBR sources said the revenue body evolved a strategy to make substantial increase in number of return filers.

The revenue body has so far issued around 4.3 million national tax numbers and all the national tax number holders are required to file income tax returns.