KARACHI: Banks in Pakistan are urging the Federal Board of Revenue (FBR) to revise its tax recovery framework from customer accounts, citing operational inefficiencies and a lack of transparency.
As part of their proposals for the upcoming budget 2025-26, banks have highlighted several challenges under sections 176 and 140 of the Income Tax Ordinance, 2001, and Rules 210C and 201B of the Income Tax Rules, 2002.
A primary concern is that single recovery notices often encompass demands for multiple taxpayers, making compliance difficult for banks. Furthermore, banks report that account holders are frequently not informed of recovery notices, contrary to Rule 210C, leading to confusion and dissatisfaction.
Another issue raised is the issuance of recovery notices by officers other than the Commissioner, which is inconsistent with Rule 201B. Banks also note that notices frequently lack clarity regarding the fulfillment of legal prerequisites and often omit the relevant tax period, complicating reconciliation with customer-submitted stay orders.
To address these issues, banks have proposed several key amendments:
Standardized Notices: They advocate for the development of a standardized information and recovery notice, in consultation with the Pakistan Banking Association (PBA) and the State Bank of Pakistan (SBP), to minimize non-compliance and operational risks.
Customer Notification: Banks recommend that customers receive copies of all correspondence related to recovery actions.
Clear Operational Instructions: They suggest issuing clear operational instructions to field officers and developing a uniform recovery notice format that ensures full legal compliance and transparency.
Inclusion of Tax Period: Explicitly including the tax period in recovery notices is proposed to facilitate reconciliation with stay orders.
Centralized Recovery Unit: Importantly, banks propose the establishment of a centralized recovery unit within the FBR. This unit would aim to streamline tax recovery processes, enhance coordination between regulators and financial institutions, and ultimately reduce disputes.
These proposed changes are aimed at creating a fairer, more transparent, and efficient tax recovery mechanism, benefiting both the financial sector and taxpayers.
