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Tax Clearing House for implementation of E-payment/refund facility through banks

ISLAMABAD (March 09 2010): The Electronic Payment and Refund System (EPARS) facility of Federal Board of Revenue (FBR) would be available through banks fulfilling minimum criteria notified by the State Bank of Pakistan (SBP). Sources told reporters here on Monday that the board would establish a Tax Clearing House (TCH) for implementation of the EPARS to directly deposit the refunds payment to the taxpayer's bank account.

The TCH would interlink FBR with commercial banks and SBP to exchange data for electronic payment of taxes and transfer of refund directly to the taxpayer's account in any major commercial bank. The SBP, being regulator, will issue all instructions to the banks on the procedure for EPARS.

The SBP will also ensure that all member banks of EPARS will follow these instructions in letter and spirit. The SBP will also reconcile the funds transfer taking place under EPARS between banks and SBP under intimation to FBR. Sources said that member banks of EPARS will be all those banks, which will fulfil minimum criteria notified by State Bank to become member of EPARS, and authorised by SBP.

The EPARS will provide the facility to taxpayers for making tax payments electronically by debiting their bank accounts maintained in any bank operating in Pakistan; and enabling FBR in crediting the refund amounts electronically in the same bank accounts of the taxpayers.

The EPARS will operate in accordance with the defined processes for the purposes of e-payments of taxes made by the taxpayers. Firstly, the taxpayer/account holder issues one-time Debit Authority (DA) to his bank branch for a particular bank account, authorising him to debit his account for making the payment of taxes when an Electronic Debit Advice (EDA) for a particular amount up to a certain limit, if any, is issued by him using the Taxpayer Facilitation Portal of FBR.

The bank branch, after due verification of the Debit Authority, will issue a Tax Card Number (TCN) to the taxpayer along with a Debit Authority Activation Code (DAAC). The bank will communicate TCN and DAAC electronically to FBR System through a secured and dedicated link established between the bank headquarters and Tax Clearing House.

By using the TCN and the DAAC, the taxpayer will activate his Debit Authority, as a result of which TAXPIN will be issued to the taxpayer. Thereafter the taxpayer will be able to make e-payments by issuing Electronic Debit Advice (EDA) using the Taxpayer Facilitation Portal of FBR.

The procedure further specifies that the Taxpayer Facilitation Portal (TFP) will communicate the Electronic Debit Advice (EDA) prepared by the taxpayer to Tax Clearing House (TCH). The TCH will transmit the EDA to the member bank in the EPARS format. The member bank will process the EDA through internal banking system and perform actions like EDA authentication; balance inquiry; debiting the Taxpayer Account (TPA); crediting the clearance account and send Electronic Credit Message (ECM) to TCH in the EPARS format, if the EDA is successfully processed and Clearance Account is credited for the full amount of the EDA.

The member bank will send Electronic Decline Message (EDM) to TCH in the EPARS format, if the EDA is declined for any reason along with a reason code. Upon receipt of a successful ECM, the TCH will create a debit entry in the Clearance Member Bank Account (CMBA).

Each Member Bank of EPARS maintains a CMBA with TCH under a guarantee of State Bank of Pakistan, undertaking that at the end of Day the Member Bank will settle the CMBA by transferring an amount equivalent to the CMBA debit balance to the government collection account maintained in SBP through the RTGS (Real Time Gross Settlement).

The transfer entry of member bank will be confirmed by SBP by making a counter-entry in the CMBA maintained in the TCH. Final collection of taxes will be credited to Government Account in SBP through RTGS. The SBP after reconciliation will issue CPR and communicate e-copy to TCH

The TCH will transmit a Computerised Payment Receipt (CPR), issued electronically by SBP, to the Taxpayer Facilitation Portal for onward electronic communication to the taxpayer. [The system will have a parameter to control the transmission of CPR to the taxpayer upon confirmation of the Member Bank or State Bank.] The EDM, received from the Member Bank, will be transmitted to the Taxpayer Facilitation Portal for onward electronic communication to the taxpayer, procedure said.

Sources said that the Daily Bank Scroll (DBS) of all tax payments, including e-payments, will be printed by SBP. Duly signed DBS will be submitted as per the current procedure without any change along with printed copies of all CPRs. For reconciliation purposes, sources said, the TCH Server and SBP will maintain virtual ledger for all member banks.

This ledger maintains the amount credited to each Head of Account by the taxpayer. The reconciliation will be electronically performed by the system to ensure that amounts due to member banks are settled with the SBP on daily basis. The taxpayers will be kept informed, through e-mail and SMS, of the status of the processing of their e-payments at different stages.

About the system security, sources said, since very high value and large volume financial transactions will be processed through EPARS, therefore the system security is of prime importance. In order to ensure the highest level of security, following security features will be implemented in the system at hardware level as well at software level.

The public area of FBR's Taxpayer Facilitation Portal will be isolated from the EPARS and both systems will communicate through secured Web Services under Service Oriented Architecture. The databases will only be accessible through secured web services, sources added.

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