Karachi Tax Bar Association (KTBA) has proposed significant amendments to the existing laws concerning tax recoveries through the freezing of bank accounts.
The tax bar has submitted its recommendations for the upcoming budget of 2023-2024, highlighting concerns regarding the current practices followed by tax authorities.
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According to KTBA, it has become commonplace for tax authorities to approach a taxpayer’s bank with a notice under section 140 of the Income Tax Ordinance, 2001, without first issuing a notice under section 138 of the same ordinance. This practice essentially forces banks to immediately pay the outstanding tax amount without giving taxpayers an opportunity to contest the matter.
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What is even more concerning is that recoveries have been observed in cases where the judicial forums have already decided in favor of the taxpayers. This situation has prompted the Karachi Tax Bar Association to call for changes in the existing process.
KTBA suggests that, as a fundamental requirement, tax authorities should issue the initial notice under section 138 of the Ordinance. This would enable taxpayers to exercise their legal rights and contest the recoveries through appropriate legal channels. By exhaustively following the provisions of section 138, both the taxpayers and the exchequer would benefit.
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The proposed solution involves the tax authorities issuing a written notice to the taxpayer’s bank, requesting the freezing of the bank account(s) and the withholding of the amount being sought for recovery. This action would be effective until the expiration of the time period mentioned in the first notice, which is typically fifteen days. The bank would then be required to make the payment unless the notice of recovery is withdrawn by the tax authorities.
KTBA emphasizes the need for necessary amendments to the existing law in order to incorporate this proposal. By introducing these amendments, the association believes that a fairer and more transparent process for tax recoveries through the freezing of bank accounts can be established.
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The proposed changes, if implemented, would allow taxpayers to exercise their due rights and contest the recoveries through appropriate legal channels, preventing undue burden and ensuring a more just taxation system. The amendments would also create a balance between the interests of the exchequer and the taxpayers, ultimately contributing to a more efficient and equitable tax administration.
KTBA hopes that its recommendations will be seriously considered by the relevant authorities during the formulation of the upcoming budget, leading to positive reforms in the tax recovery process and greater protection of taxpayers’ rights.
