Chairman Federal Board of Revenue (FBR) Shabbar Zaidi has written a letter to heads of banks, telling them that the tax department needs information about their customers through the adoption of special procedures and formats.
The chairman personally thanked the heads in the letter for a productive and goal-oriented meeting with them on November 27, 2019, held in Karachi. As a result of that meeting, unnecessary litigations pending for a long time at the high courts have been amicably settled.
The letter says,
We agree with the suggestion of PBA that there should not be any duplication with respect to the information to be furnished by the banks through Section 165 and now operative Section 165A of the Income Tax Ordinance, 2001.
FBR is looking to issue instructions for furnishing information as required under Section 165 and 165A of the Income Tax Ordinance. The letter adds,
It has been decided at Board level that such information should be asked for in the manner and form which in line with the systems and procedures adopted by the bank and FBR, if required will coordinate with you and banks for designing such formats. It is further decided that special procedures will be instituted within the FBR information system that such information is used only for the purposes required under the law and all the taws and regulations are complied with.
On account of IPS/Trust activities, the letter mentions: ”As per our understanding, banks undertake IPS/Trust activities under certain regulations using their customers’ information, which is duly incorporated as an ‘Off-Balance Sheet Item’ in the Financial Statement of the banks.”
It is fully appreciated that the banks’ role is only that of a ‘trustee’ in such cases, nevertheless, as you are aware that substantial activities are undertaken on this account and three parties are involved in the transactions viz State Bank of Pakistan- concerned bank and the customer. It is our view that information about such transactions is with the bank therefore banks would be the suitable/approachable entity from which such information can be sought.
FBR said that its objective is to make sure that the withholding tax and other compliance procedures are accounted for.
We have taken notes and in our view, the best way to proceed further with respect to the matter of withholding under Section 151 of the Income Tax Ordinance, 2001 will be to constitute a high-level committee representing the following to decide the future course of action.
These members were asked to participate in the letter:
- Member Inland Revenue Policy-FBR
- Chief Commissioner Large TaxPayers’ Unit, Karachi
- CEO/Secretary General Pakistan Banks Association
- Three Presidents of the Banks representing various tiers.
”We suggest that you provide the names of the Presidents to be nominated to the committee which will be notified accordingly 7 Committee shall decide the matter within a month and provide recommendations for the future course of action.” stated the letter.