The money-go-round

As much as Rs102 billion may have been laundered in the ongoing fiscal year

Everybody likes to get a gift. Gifts are good to give as well. The richer one is the greater the possible value of the gift. It would be pleasant to receive a gift of Rs1.7 billion, for instance. This is not mere conjecture but the actual value of a gift declared by one of 2,785 people who may have used the ruse of ‘gifting’ to evade taxation. As much as Rs102 billion may have been laundered in this way in the ongoing fiscal year, according to the Anti-Money Laundering cell of the Intelligence and Investigation branch of the Inland Revenue. As per existing law, gifts are exempt from taxes, a by no means uncommon arrangement around the world and a recognised and legal strategy by which wealth is kept within families and other groups.

Some of these transfers are perfectly legal and above board and inevitably some of them are not, and at best questionable if not downright illegal. The 2,785 wealthier Pakistanis may have got ‘gifts’ from their parents, siblings or spouses who mysteriously were outside the tax net and/or had no known source of income. The revenue sleuths found that there were cases that where substantial incomes were declared but the taxes paid on them were minimal, nominal only in some cases. The ‘gifts’ column of the return was dutifully filled in and the suspicions of the revenue men was raised.

The wealthy have every right to protect their assets. Much of their money is (probably) honestly acquired, but in a country perennially strapped for cash and with tax collection a mere fraction of what it ought to be — then the wealthy have to pay up. If monies are found to be transferred via what is known as the ‘gift back arrangement’ to intentionally evade tax then assets can be sequestered under the Anti-money Laundering Act of 2010. A ten-year jail sentence is also a possibility. ‘Never look a gift horse in the mouth’ goes the old saying. Well maybe.

Published in The Express Tribune, June 4^th, 2017.

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