FBR to seek bank accountholders’ data

KARACHI: The Federal Board of Revenue (FBR) kicked off drive to identify potential taxpayers through scrutiny of cash withdrawals by them from the banking system, sources said on Wednesday.

The sources said tax offices having jurisdictions over banks set up teams to obtain information from banks about individuals who make cash withdrawal of up to Rs50,000 per day and aggregate amount of one million rupees per month in case of both filers and non-filers.

The FBR will obtain the specific data from banks of the past six years, the sources added.

The tax authorities issued a statutory regulatory order (SRO 1305(I)/2018) earlier this month to amend Income Tax Rules 2002 to make it mandatory for banks to provide such details.

The banks will provide details of accountholders, including name, computerised national identity card number, address, and withdrawn amount during a month.

The FBR imposed withholding tax on cash withdrawal through the Finance Act 2005 and made it mandatory for banks to provide details of accountholders making withdrawals. Presently, the rates of withholding tax on cash withdrawal are 0.3 percent for filers and 0.6 percent for non-filers.

The banks, however, could not comply with the law to provide information of accountholders on the pretext that plethora of documents was involved and some other reasons, including secrecy clauses.

The sources said the changes in the law would help banks provide details as sorting of such accountholders would now be easy. Besides, the FBR also withdrew several requirements to be fulfilled by the banks, they added.

The sources said the cash withdrawal from banking system happened to be huge following the introduction of Section 236P of the Income Tax Ordinance 2001 under which only non-filers were required to pay withholding tax on non-cash banking transactions. The Section 236P was inserted into Income Tax Ordinance 2001 through Finance Act, 2015 (for the tax year 2016/17).

The sources said traders and other businessmen make large withdrawals to dodge tax authorities and avoid becoming part of the documented economy.

The State Bank of Pakistan (SBP) said there has been a significant negative effect on deposits of banks.

“Currency in circulation grew 21.5 percent on average during July 2015 to June 2017 against an average growth of 14 percent recorded in the past 11 years prior to its [withholding tax] imposition that is, between July 2004 to June 2015,” the SBP said in the state of Pakistan’s economy report for 2016/17.

The central bank further said private sector’s banking deposits as a percentage of total deposits declined to 25 percent from 27.6 percent after imposition of the withholding tax on banking transactions.