Section 237A of the Income Tax Ordinance, 2001 empowers the Federal Board of Revenue (FBR) to enforce the use of electronic modes for record keeping.
The provision, which was incorporated through the Finance Act, 2021 and is applicable as of June 30, 2021, grants the FBR the authority to require individuals and entities to transition from manual business processes to automated ones and substitute paper-based records with electronic records.
The text of Section 237A outlines the board’s prerogative to leverage its information system and electronic resources for a more efficient and streamlined tax documentation process. The provision reads:
Section 237A – Electronic Record:
(1) Transition to Automated Business Processes: The Board may compel any person to utilize its information system and electronic resources to replace or supplement manual business processes. This mandates a shift towards automated business processes, eliminating traditional manual methods in favor of more advanced and efficient electronic systems.
(2) Validity of Electronic Records: Electronic records generated, maintained, issued, served, received, filed, or requisitioned through the electronic resource of the Board shall be deemed valid, authentic, and integral. Furthermore, such records will be treated as having been conducted in accordance with the provisions of the Income Tax Ordinance, 2001. This provision seeks to instill confidence in the electronic record-keeping system, ensuring its reliability and acceptance within the legal framework.
The adoption of electronic record-keeping is expected to bring several advantages to the taxation system. It not only enhances the efficiency of tax administration but also facilitates a more transparent and accountable process. Electronic records, by their nature, can reduce the likelihood of errors and provide a more accurate representation of financial transactions, ultimately contributing to a more robust and reliable tax reporting mechanism.
This move aligns with global trends where many countries have transitioned to electronic record-keeping systems to keep pace with technological advancements. The FBR’s initiative is not only a step towards a more technologically driven tax regime but also a measure to curb tax evasion and ensure the accuracy of financial information.
However, as with any transition, there may be challenges and concerns related to the security and privacy of electronic records. The FBR will need to establish robust cybersecurity measures to safeguard sensitive taxpayer information and address any potential risks associated with the digitalization of records.
The implementation of Section 237A marks a significant milestone in the modernization of tax administration in Pakistan. It reflects the government’s commitment to leveraging technology for enhanced efficiency, transparency, and accountability in the tax system. Taxpayers and businesses are encouraged to adapt to these changes, keeping abreast of electronic record-keeping requirements to ensure compliance with the provisions of the Income Tax Ordinance, 2001.
