SBP Gains Access to High-Value Bank Data Under New Tax Framework

Pakistan's tax and banking authorities are moving toward a more automated system for monitoring high-value financial activity after amendments to the Income Tax Ordinance, 2001, enabled the State Bank of Pakistan to establish and maintain a secure centralised repository of banking information. The framework is designed to bring selected financial records into a digital system where they can be checked against tax information without relying on routine manual scrutiny.

Under the new Section 165AB, banking companies and electronic money institutions are required to electronically provide prescribed information relating to account holders whose deposits or withdrawals cross Rs100 million during a reporting period. The requirement covers relevant banking records and transaction information and applies despite confidentiality provisions contained in several existing banking laws.

The system is intended to use algorithmic cross-matching rather than giving tax officials unrestricted access to raw banking records. Financial information uploaded into the central mechanism will initially be processed digitally and compared with available tax data. During this automated stage, income tax authorities are not supposed to directly view the information being analysed.

If the automated process identifies a significant mismatch between banking activity and tax information, the case can then be transferred into the Compliance Risk Management system for further proceedings through the National Faceless Centre. The mechanism is aimed at identifying potential discrepancies such as undeclared financial activity, under-reported sales or other inconsistencies that may require examination under tax laws.

The reporting framework focuses on high-value activity rather than every routine banking transaction. The Rs100 million threshold is assessed during defined six-month reporting periods, covering July through December and January through June. Information for those periods is scheduled to be submitted according to specified reporting deadlines, creating a recurring digital compliance process for banks and electronic money institutions.

The development is significant for Pakistan's broader effort to expand documentation of the economy and strengthen technology-based tax administration. Businesses and individuals handling financial flows above the prescribed threshold will face greater automated comparison between their banking activity and declarations submitted to tax authorities. At the same time, the legal framework includes confidentiality safeguards intended to restrict unnecessary human access during the initial screening process.

Implementation will now depend on the effectiveness and security of the central data infrastructure, the accuracy of automated matching and compliance by financial institutions with reporting requirements. The next phase will be closely watched by businesses, taxpayers and the banking sector as authorities operationalise the system and begin using digitally identified mismatches for risk-based enforcement.