The federal government may promulgate a presidential ordinance to hand over record of existing three million taxpayers to the National Database and Registration Authority (NADRA) in a bid to increase tax collection, which may severely compromise privacy of the people.

The law that governs NADRA – the body set up to only maintain citizens’ database – does not permit the authority to indulge into the function of enhancing tax collection, which remains the sole job of the Federal Board of Revenue (FBR).

Sources in NADRA told The Express Tribune on Wednesday that the FBR and NADRA were collaborating to make a legal amendment to the Income Tax Ordinance to relax a clause that barred the FBR from sharing information of income tax return filers with a third party.

They added a new amendment had been drafted to change the existing Section 216(3) to make room for sharing the income tax statement and wealth statement of taxpayers with NADRA.

“The Artificial Intelligence engine would determine tax liabilities based on data of registered and unregistered persons and standard deviations would be minimum only when filers and non-filers data is available for analysis,” said NADRA Chairman Tariq Malik while talking to The Express Tribune.

He vowed to protect the taxpayers’ data from misuse, saying the data would be expunged from the NADRA system after completing the exercise.

NADRA sources revealed that in 2019 the FBR had discreetly handed over the tax record of income tax return filers for the period 2014 to 2018 to NADRA. But the tax machinery was now reluctant to do it again, the sources added.

In order to address the concerns of the FBR, the government has now prepared a draft presidential ordinance, said the sources. The ordinance may also fix some of the omissions in the Finance Act that the National Assembly approved last month, including banking sector amendments.

Sources said that the FBR had already handed over withholding tax statements of unregistered persons to NADRA but was not willing to provide information of income tax return filers for 2019 and 2020.

There are hardly three million income tax return filers in Pakistan who often complain about undue harassment at the hands of FBR and NADRA now seems to be another entity to be added to the list.

When contacted, FBR spokesman Syed Nadeem Rizvi said that in 2019 “information was shared with NADRA under clause kb of Section 216(3) of the Income Tax Ordinance”. However, the clause kb does not permit sharing the income tax return filers’ data.

It states to “National Database and Registration Authority for the purpose of broadening of the tax base”.

Sources said that the Law Division also gave a clarification that the FBR could only share non-registered persons’ tax record with NADRA in light of clause 216(3) (kb). However, the FBR has already shared registered persons’ tax record with NADRA two years ago.

The government was then hoping that NADRA would help the FBR enhance tax collection by analysing the information about income tax return filers. But nothing concrete could be achieved despite sharing the information with NADRA, apparently in violation of the income tax law.

“NADRA has not shared with the FBR the outcome of data provided to it in 2019,” replied Rizvi while responding to a question. He said that “presently the FBR is not working on any ordinance”.

But the FBR has already prepared a draft of the ordinance and sources said that the revenue board had a plan to issue it last week but put off the plan due to other engagements of the finance minister.

For the last almost a decade, NADRA has been claiming that it can help achieve the objectives of broadening the tax base and increasing the tax collection through artificial intelligence-based mathematical models.

Sources said that a meeting was also held at the NADRA headquarters on Wednesday to finalise modalities for the sharing of information by the FBR and the enforcement mechanisms to take action based on NADRA’s input.

It is the second attempt that the government is going to make in less than a month to share taxpayers’ record with a third party.

Earlier, days before the approval of FY22 budget, the National Accountability Bureau (NAB) asked the government to give it access to local and offshore tax records of all politically exposed persons, bureaucrats and their families by introducing new legal amendments.

NAB had also sought to relax Section 216 of the Income Tax Ordinance, which ensured confidentiality of taxpayers’ data.

Section 216 bars the FBR from the disclosure of information by a public servant but its sub-section 3 provides certain exemptions. The government now wants to amend sub-section 3 to allow NADRA to get access to the taxpayers’ record.

Sources said that the FBR was reviewing the request to hand over tax record of at least six prominent anchor persons, including two women.

Published in The Express Tribune, July 29th, 2021.

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