KARACHI: Federal Board of Revenue (FBR) has been advised to withdraw powers of tax officials related to freezing bank accounts for tax recovery.
Karachi Chamber of Commerce and Industry (KCCI) in its budget proposals for 2020/2021 submitted to the FBR highlighted provisions of Income Tax Ordinance, 2001 regarding accessing bank accounts for tax recovery.
Under Section 140 of the Income Tax Ordinance, 2001 which deals with recovery of tax from persons holding money on behalf of a taxpayer.
— (1) For the purpose of recovering any tax due by a taxpayer, the Commissioner may, by notice, in writing, require any person –
(a) owing or who may owe money to the taxpayer; or
(b) holding or who may hold money for, or on account of the taxpayer.
This provision and further access to information on a bank accounts under other provisions of law, have been counterproductive and led to a flourishing cash economy, the KCCI said.
It said that there were many innovative ways been evolved by businesses similar to the blockchain and local hundi system.
Such provisions only affect the registered businesses while the entire unregistered sector is immune from such laws and a coercive approach.
Banks are also suffering with decline in deposits and transactions which used to be conducted through the system. It is evident from a slowdown in economic activities, the chamber said.
It is better to do way with such anti-growth and anti-business policies and laws. Powers to access the bank accounts of registered persons and to freeze account should be withdrawn through Finance Bill 2020.
Access may only be limited to accounts of unregistered persons, but account may not be blocked or frozen.
Commissioner should only be authorized to obtain information about the funds in accounts and should be authorized to seek clarification as to the nature of transactions and sources of funds. Such persons may be brought into the tax-net.
The Karachi Chamber said that the proposed amendments would provide relief to the registered persons and restore confidence in banking system and would encourage official transactions.
Besides, it would help in bringing unregistered persons into the tax-regime.
Stimulate economic activities and growth. Increase bank deposits which may be used for lending to industry.