Stock brokers approach FBR, SECP on seizure of bank accounts

KARACHI: Stocks brokers on Friday lodged complaints with the Federal Board of Revenue and Securities and Exchange Commission of Pakistan on the seizure of bank accounts of their clients for recovery of withholding taxes.

Pakistan Stock Exchange (PSX) Stock Brokers Association dubbed this as “maladministration in monitoring of withholding tax practice of creating bogus demand and in seizure of bank accounts despite refunds intimation.”

The association, in a letter to Tariq Pasha, chairman Federal Board of Revenue (FBR), said a regional tax office “...in the first instance seized all the bank accounts of our members. While doing this even bank accounts, reserved by law for keeping funds for the clients only, are not spared.”

Officials at the FBR, however, said recovery was made as per the law. “Withholding statements submitted by stock brokers were examined carefully before the issuance of notices,” said an official.

The association alleged that the tax officials neither examined statements and nor paid any attention to volumes of details obtained from them. “Instead of quoting instances where a particular employee had been paid taxable salary without deduction of tax or any expense attracting deduction was incurred without deduction, learned officer in show cause notices picked up gross figures from profit and loss account, applied hypothetical rates of tax deduction and confronted the taxpayers with astronomical figures of tax not deducted,” it said in the letter. 

“In this manner, the learned officer first created a fear in the mind of the members and then when negotiations failed the same show cause notice became the basis of his orders.”  Ghulam Mujtaba Sakarwala, general secretary of PSX Stock Brokers Association also asked the Securities and Exchange Commission of Pakistan (SECP) to resolve the issue. 

Sakarwala, in another letter, urged the SECP chairman to advise the FBR that the bank accounts, though in the name of the brokerage houses yet titled with the addendum client account, may not be treated as money of the brokerage house and should not be subject to seizure for recovery of demand. 

He said there are 390 active PSX members in the country, out of which 140 members are operating from Karachi. He declined to share the number of brokers and amount of recovery made from them by FBR. 

“A large number of brokers in Karachi received show cause notices upon which bank accounts were frozen,” Sakarwala said. “In the presence of monthly and annual statements, monitoring of withholding tax ought to be a simple affair.”

The association said the tax laws allow a taxpayer to pay 25 percent of the tax demand with an opportunity of appeal. “The tax officials completely violated the laws in freezing bank accounts,” it added.

The PSX Stock Brokers Association demanded the apex tax authority to hold an enquiry against officials involved in the matter. It asked the board to restrain the tax officials from attaching bank accounts of brokerage houses, titled ‘client account’.