Transaction Restrictions on Non-Filers Violates the Law: Tax Expert

A leading tax expert has apprehended that the restrictions on financial transactions of non-filers under “Tax Laws (Amendment) Bill, 2024” would violate Articles 18 (Freedom of trade, business or profession), and Article 23 (Provision as to property) of the Constitution.

According to the commentary of Tola Associates, and Tola & Tola on “Tax Laws (Amendment) Bill, 2024” revealed that filing of sources of investment and expenditure statement is against the self-assessment scheme under Income Tax Ordinance. Therefore, it may be held to be ultra vires the ITO by the courts of law in Pakistan.

The Bill has proposed to introduce Section 175AA in the ITO, whereby the Board has been authorized to share the following information:

• Turnover
• Income including taxable income, for one or more tax years
• Identification data including bank account numbers declared in the income tax return
• Wealth statement
• Financial statement, or in any other document to the Board, in respect of persons or classes of persons, along with data-based algorithms, as may be prescribed, with scheduled banks in Pakistan.

Tax experts opined that section 175AA may violate Article 14 of the Constitution, as it breaches the taxpayer’s right to privacy. Further, no degree of variance has been specified in Section 175AA(1)(b). As such, the FBR may obligate the bank to share the taxpayer’s particulars even if there is the slightest degree of variance. The same seems arbitrary and must be revisited, according to the experts.

The appointment of third-party auditors and the sharing of information by the taxpayer to them may violate Article 14 of the Constitution. Further, it puts the taxpayer at risk, as the auditor may be the auditor of the taxpayer’s competitor, and as such access to the taxpayer’s information may give rise to a conflict of interest. Further, it may also militate the taxpayer’s right to do business as enshrined in Article 18 of the Constitution, Ashfaq Tola added.