Karachi, November 4, 2024 – In a move aimed at reinforcing transparency and broadening the tax net, the Federal Board of Revenue (FBR) has instructed banks to provide detailed information on account holders involved in transactions subject to withholding tax deductions.
This directive, grounded in Section 165A of the Income Tax Ordinance, 2001, underscores the FBR’s commitment to enhancing tax compliance and tackling tax evasion across Pakistan.
Under Section 165A, banks are now required to disclose comprehensive financial data of account holders conducting significant transactions. Specifically, banks must furnish lists of account holders making daily cash withdrawals exceeding Rs 50,000, with monthly totals of such withdrawals reaching Rs 1 million or more. Additionally, account holders with deposits surpassing Rs 10 million in a single calendar month must also be reported. Other financial activities under scrutiny include credit card payments exceeding Rs 200,000 in a month, profit earned on debt, and information on newly opened or re-designated business accounts.
The FBR emphasized that this mandate supersedes various legal protections under previous regulations, including the Banking Companies Ordinance of 1962, the Protection of Economic Reforms Act of 1992, and the Foreign Exchange Regulation Act of 1947. By requiring banks to report high-value transactions, the FBR aims to enhance its ability to detect income inconsistencies, thereby enabling more effective tax assessments.
To streamline compliance, each bank must designate a senior officer at the head office to liaise directly with the FBR, ensuring the efficient provision of requested data. Furthermore, banks and their officers are shielded from civil, criminal, or disciplinary liabilities when disclosing information in compliance with this ordinance, granting them legal immunity in carrying out their duties under Section 165A.
While some may view this initiative as an intensification of regulatory oversight, the FBR has assured account holders and financial institutions that all information gathered under this provision will remain strictly confidential, as stipulated by Section 216 of the ordinance. The data is solely intended for tax-related purposes and will be handled with the highest standards of discretion to preserve account holder privacy.
This step reflects the FBR’s determination to close the tax gap and improve revenue collection in Pakistan. By compelling banks to disclose significant account activity, the FBR can more accurately identify taxable income, ensure fair tax contributions, and curb tax evasion. This new compliance measure also seeks to level the playing field for honest taxpayers by bringing previously unreported or underreported income into the formal tax system.
As Pakistan strives to achieve a more robust economic framework, the FBR’s directive to banks represents a strategic maneuver to enhance transparency, accountability, and compliance within the financial system.
