Presently different governments are obtaining information about the accountholders even from the Swiss banks.
Sources told Business Recorder here on Thursday that the issue mainly related to the sharing taxpayer's information either on service of a notice u/s 176 of the Income Tax Ordinance, 2001 (Ordinance) or under the provisions of section 165 of the Ordinance wherein the withholding tax statements are filed particularly for 'Profit on Debt' paid. The issue was discussed threadbare during a meeting between the representatives of Pakistan Banks Association and Senior officials of the FBR with Member Inland Revenue (IR) Shahid Hussain Asad in the chair at the FBR House on Wednesday.
According to sources, the representatives of the banking sector brought to the notice of the tax authorities various provisions of law with specific reference to section 33A of the Banking Companies Ordinance, 1962, and sections 3, 5 & 9 of the Protection of Economic Reforms Act, 1992 which specifically pertain to maintenance of secrecy and sharing of information with any third party be it by way of calling of information or withholding tax statements under the Income Tax Ordinance 2011. The information about the accountholders was argued to be confidential under the Banking Companies Ordinance 1962 and Protection of Economic Reforms Act, 1992 and secrecy is involved in providing interest related information to the tax department. The delegation also informed the FBR about the practical difficulties being faced by the banks in filing withholding tax statements including information about the 'payee' from whom tax was deducted. It was informed that presently the banks were facing multiple issues in filing the statements and it was very difficult for the banks to submit details in the withholding statements and tax department should consider the problems faced by the banks in this regard.
The bank's representatives have also shown their concerns about the submission of information to the tax department under the Income Tax Circular No. 09 of 2011 (Deduction of Tax at Source from Payment of 'Profit on Debt' under Section 151 and 152 of the Income Tax Ordinance, 2001, and Reporting Requirements).
Responding to the problems of banks in filing of statements, sources said that the tax authorities have assured the PBA of full co-operation to facilitate the banks in accurate filing of withholding tax statements. The FBR will also direct the Pakistan Revenue Automation Limited (PRAL), the IT arm of the FBR to facilitate the banks in accurate filing of withholding tax statements. If the banks are facing problems in the existing system during filing of statements, the FBR will try its level best to streamline the procedures for collection of necessary information as required in the withholding tax statements.
The tax officials have also informed the association that the FBR is actively engaged in the exercise of broadening the tax base and documentation of the economy. For this purpose, the information about the 'payee' is also required under the withholding tax statements to be filed by the banks. The submission of the complete withholding tax statements is necessary along with the compliance of Income Tax Circular No. 09 of 2011. The information to be provided by the banks to the tax department under the Income Tax Circular No. 09 of 2011 does not clash with the secrecy provisions of the banking laws, tax officials opined.
As far as banking secrecy laws are concerned, the FBR has further informed that some governments have accessed the accountholders information of the Swiss banks. The secrecy of taxpayer's data under banking laws has become less relevant in the current global scenario. The Swiss banks have started providing information about their accountholders to different governments. Keeping in view these international developments, the submission of basic information about the accountholders do not comprise the bank's secrecy laws. However, the FBR is ready to take State Bank of Pakistan (SBP) on board to resolve the issue of providing accountholder's information by the banks to the tax department. The banks would not find any problem in providing requisite data through the withholding statements.
The FBR has decided to convene another meeting with the representatives of banks and SBP would be requested to participate in the meeting, tax officials added.
Under Income Tax Circular No. 09 of 2011, it is mandatory for banks to provide the information through challan of payment at the time of deposit of the tax deducted. The information included particulars of the withholding agent including National Tax Number (NTN) or Free Tax Number (FTN) and name/address. Other information included particulars of the person from whom tax has been deducted included the NTN or Computerised National Identity Card Number (CNIC) or Passport # (in case of nonresidents) and name and address and other information as required in the circular.
When contacted, a tax & legal expert on the issue of providing of information he said that though the Swiss banks have started to provide the information in certain specific cases only yet it was done after having the local banking laws (Swiss laws) amended to such an extent. The Swiss banks & economy thrived on this secrecy which was protected by law of the land. Recently, the Swiss laws have been amended to make it so convenient for the banks to share certain information of the accountholders. In Pakistan like other countries the secrecy of information in the banking is protected to give comfort and protection to the accountholders. Although the Income Tax Ordinance 2001 being a special law may override the other banking laws yet the banks would not like annoy their regulator. It is for this reason that the FBR has taken the correct decision to take SBP on board. The FBR should have the relevant laws amended if they want to facilitate the banks, otherwise the tax law is in their favour of the FBR and can be used to coerce any information, tax lawyer added.
