FBR expects legal change to get banking data from next year

KARACHI: Tax collectors are expecting information of financial transactions from banks on real-time basis with the start of next year to net untaxed economy, as the prime minister directed the authorities to do the needful amendments into the banking laws, sources said on Tuesday.

The sources said the Federal Board of Revenue (FBR) is making arrangements to utilise information of millions of financial transactions for identifying black economy and tax evasion.

“From next year, the FBR may get real-time data of financial transactions of all banks as the prime minister ordered making amendments into banking laws,” a source in the Regional Tax Office (RTO) – II Karachi said. An official at the RTO-II Karachi said Prime Minister Imran Khan directed the ministry of law and justice and the State Bank of Pakistan to propose necessary amendments into banking laws and regulations to ensure real-time data sharing of financial transactions with the FBR. The official said the amendments might be finalised by this yearend. The law of information sharing was incorporated into the Income Tax Ordinance 2001 through Finance Act 2013. However, the banks are reluctant to share the information of transactions with tax authorities, the officials said.

A section (165A of the ordinance) was introduced six years ago to make it mandatory for banks to provide details of their accountholders making transactions with the tax authorities. Under the laws, the banks are bound to provide details, including a list of individuals making cash withdrawal of Rs50,000 per day or over Rs1 million in a month, deposits of Rs10 million in a month and making credit card payment of Rs250,000 per month and individuals receiving profit on debt above Rs500,000 in a year.

The amended laws in Income Tax Ordinance 2001 have superseded other laws, including Banking Companies Ordinance, 1962, the Protection of Economic Reforms Act, 1992, the Foreign Exchange Regulation Act 1947. Yet, the banks are not providing the details on the grounds of various excuses, according to the sources.

The official said the matter is subjudice.

The official said unavailability of such information is a major reason of black economy in the country. Following amendments into the banking law, the tax authorities would be able to access real-time information of transactions made through banking system, the official said.

Recently, FBR Chairman Shabbar Zaidi asked the banks to provide details voluntarily and then tax offices issued instructions separately but all in vain. The SBP started drive to verify bank accounts and a recent report released by the central bank revealed that around 7.6 million bank accounts remained unverified till June 30, 2019. The official said out of 54.7 million accounts such a huge number of unverified bank accounts showed serious risk to the economy.