ISLAMABAD: Former Federal Board of Revenue (FBR) chairman Shabbar Zaidi’s instructions to stop recovery of disputed taxes from bank accounts without prior intimation to taxpayers were “illegal”, one of the top functionaries of the tax machinery said on Thursday.
The revelation was made by Member Inland Revenue Operations Qaiser Iqbal before the Senate Standing Committee on Finance.
The committee, however, unanimously stood by the side of Zaidi and recommended the government to revive the instructions which the FBR withdrew 10 days ago.
The standing committee also rejected the government’s move to bind the corporate sector to make payments only through the digital mode which, it said, would increase hardships of the taxpayers.
The digital mode of payments has been introduced without the groundwork for such a major initiative.
Headed by JUI-F’s Senator Talha Mehmood, the standing committee discussed various actions of the FBR that in recent days had caused anxiety among taxpayers, including the restoration of powers of FBR commissioners to attach bank accounts of taxpayers and recover the disputed amount.
“The act of former FBR chairman that no bank accounts shall be attached unless the taxpayer’s chief executive officer/principal officer/owner is informed at least 24 hours prior to attachment and the FBR chairman’s approval is obtained was against the law,” said Iqbal while responding to questions raised by members of the standing committee.
Iqbal said that relevant statutes, passed by the legislature, and the framed rules allowed FBR commissioners to attach bank accounts.
The FBR chairman had taken the powers of commissioners into his own hands by making it mandatory to seek his approval, said the member IR operations.
In May 2019, Zaidi had issued instructions, saying “no bank accounts attachment unless the taxpayer’s chief executive officer/principal officer/owner is informed at least 24 hours prior to attachment and the FBR chairman’s approval is obtained”.
However, the FBR has again allowed its officers to forcefully recover disputed taxes from the bank accounts of taxpayers.
FBR’s Inland Revenue Operations chief Amir Bhatti disclosed that whenever a file was received for approval of the FBR chairman to attach the bank accounts, the information was leaked to the taxpayer, who would withdraw cash from the account before any action was taken by the FBR.
However, the standing committee did not accept the justification.
If the government wanted to end harassment of taxpayers and promote tax culture, then the right way to do that was the one taken by former FBR chairman, said Senator Mohsin Aziz of the Pakistan Tehreek-e-Insaf.
The committee unanimously recommended the FBR to restore the May 2019 instructions.
The standing committee also barred the tax collection authority from influencing the FBR’s appeal commissioners. In August, the FBR had instructed the commissioners of appeals – which are a quasi-judicial forum – to justify their judgements before the chief commissioners of Inland Revenue.
Standing Committee Chairman Mehmood said that the commissioners of appeals could not be independent as long as their performance evaluation was done by the FBR’s top hierarchy and their transfers and postings were also in the hands of top brass of the authority.
“I say on oath that an appeals commissioner told me that he was under pressure to give decision against the taxpayer,” said Senator Talha.
For the past over one year, FBR has raised hundreds of billions of rupees tax demands, which has created unease among the taxpayers.
The standing committee also unanimously rejected the government’s move to bind the corporate sector to make payments only through the digital mode. Through a Presidential Ordinance, the government had made it compulsory for companies to make payments on expenditures exceeding Rs250,000 through digital mode only, according to the FBR.
Following adverse reaction from the business community and lack of preparedness of banks, the government has suspended the enforcement of the clause for 46 days, Income Tax Policy Chief Zafar Rafique told the standing committee.
Rafique said that the central bank has now issued a circular directing banks to facilitate digital payments. He said that the legal requirement was suspended till November 1.
The revenue board’s decision to move towards digitisation of the economy is a step in the right direction but it was taken in haste and without proper consultations, said Senator Farooq H Naek of the Pakistan Peoples Party.
The compulsory digital payments initiative cannot be successful due threats of hacking and the lack of awareness of the digital mode of payments, said Senator Mohsin Aziz.