Karachi, December 21, 2024 – In a landmark move aimed at tightening tax compliance, the Federal Board of Revenue (FBR) is set to be granted sweeping powers to obtain and cross-check taxpayers’ bank details with the income and assets declared in their returns.
This significant development comes as part of the proposed amendments under the Tax Laws (Amendment) Bill, 2024, which includes a provision for the exchange of banking and tax information, specifically targeting high-risk individuals and entities.
According to a detailed commentary on the bill released by Tola Associates and Tola & Tola, the proposed amendments would introduce Section 175AA to the Income Tax Ordinance (ITO), 2001. This provision would empower the FBR to access a taxpayer’s comprehensive financial data, including turnover, taxable income, and other critical financial information, for one or more tax years. Furthermore, the amendment allows the FBR to obtain the identification data, such as bank account numbers, as declared in the income tax returns, wealth statements, or financial statements, and cross-check it with data algorithms prescribed by the tax authorities.
A key aspect of the bill is the mandatory obligation placed on scheduled banks to provide specific details, including the names and account numbers of individuals whose banking information shows discrepancies when compared to the data provided by the FBR. The bill stipulates that if any inconsistency is found between the bank records and the prescribed data algorithms, banks must report these discrepancies to the FBR, ensuring enhanced transparency and accountability in financial dealings.
To safeguard sensitive information, Section 175AA also includes provisions to maintain the confidentiality of any data shared between the FBR and financial institutions. The use of this data will be strictly for tax purposes, in accordance with the regulations laid out in the section.
In a further bid to ensure the unimpeded implementation of these provisions, Section 175AA has been given an overriding effect. It specifically overrides several key regulations, including the Banking Companies Ordinance of 1962, Section 216 of the Income Tax Ordinance, and any regulations under the State Bank of Pakistan Act of 1956. This non-obstante clause strengthens the FBR’s ability to access financial data, even if other legal provisions may otherwise restrict such actions.
The amendments reflect the government’s ongoing efforts to combat tax evasion, particularly among high-risk taxpayers, by leveraging data analytics and cross-referencing bank details with income declarations. While the move is expected to boost the country’s tax collection efforts, it also raises concerns about privacy and the potential for misuse of financial information. As the bill progresses, the implementation and oversight of these powers will be crucial to balancing effective tax enforcement with the protection of individual rights.