After 2-year delay, Benami Act to come into force this week

It will empower taxmen to confiscate properties held in names of people other than owners

ISLAMABAD: The Benami Transactions Prohibition Act would finally become operational this week after a gap of two years, which would empower taxmen to confiscate properties held in other than owners’ names, said a top official of the tax machinery on Monday.

However, the Federal Board of Revenue (FBR) did not have a plan “at this stage” to give amnesty to those who held properties in others’ names, said Dr Hamid Ateeq Sarwar, FBR Member Inland Revenue Policy, while addressing a press conference.

FBR Member Inland Revenue Operations Seema Shakil updated media about the reasons behind the massive revenue shortfall of Rs191 billion for July-January FY19.

Sarwar said the federal government would make a demand for integrating federal and provincial tax authorities during the scheduled maiden meeting of the National Finance Commission.

The Benami Transactions Prohibition Act 2017 would become operational from February 8 but would be applicable from the date the president gave its nod, said Sarwar.

Parliament approved the law in January 2017 and the president gave his stamp of approval the next month. In the last two years, bureaucrats and politicians successfully delayed application of the law on flimsy grounds. The decision to make the law operational was taken last week during a meeting chaired by Prime Minister Imran Khan.

The FBR member policy said a date had been given in the Benami transaction prohibition rules for making them effective from 2017. The rules have been sent to the law ministry for final vetting. He hoped that the rules would be notified before the end of current week.

“It is a very harsh law that authorises the FBR to confiscate properties held in others’ names,” said Sarwar. But he ruled out the possibility of giving an amnesty scheme to those who held properties in others’ names.

Top-ranking FBR officers also said it was not easy to collect taxes by raising tax demands. The FBR sent 6,000 tax notices to high net worth individuals. Of those notices, tax demand worth Rs6 billion was raised against 204 people and they paid only Rs2.6 billion, said Member Operation Shakil.

Sarwar said notices were also sent to people who availed offshore and domestic tax amnesty schemes, adding this happened because the FBR field formations did not have access to data of those who availed the amnesty scheme.

The FBR member said in case a person availed the amnesty scheme but did not declare the asset that lately came to the FBR’s knowledge, the FBR would send notice to such person. The last Pakistan Muslim League-Nawaz (PML-N) government had offered the offshore and domestic tax amnesty schemes aimed at allowing people to declare their hidden assets. The FBR collected Rs120 billion in taxes but the people legalised Rs1.75 trillion worth of assets.

With the enforcement measures, the FBR could not collect additional Rs500 billion in one year, said Sarwar. He said even in the United States, the tax collection through enforcement measures amounted to only 3% of the total collection.

The member policy said the federal government would take up the issue of integrating the goods and services tax during Wednesday’s meeting of the National Finance Commission. He said the issue of separate tax administration had to be resolved sooner or later. Either the FBR or provincial tax authorities should be abolished but there should be one integrated national tax collection agency, he added.

To a question, Sarwar said the Rs4.4-trillion annual tax collection target could not be achieved and “we have requested the federal government to lower the target”.

The government had an option to either impose additional taxes or reduce the taxes to boost economic growth and it picked the latter option, said the FBR member.

The member operations said due to the government’s focus on economic revival, there would be a shortfall in tax collection in the short term.

Sarwar said in first seven months of FY19 the tax collection was Rs2.060 trillion, which was higher by only Rs65.4 billion or 3.3% compared to the same period of previous fiscal year.

Shakil said the withholding tax collection had significantly decreased in the ongoing fiscal year due to change in tax rates. Resultantly, she said, the share of withholding taxes in the total income tax collection decreased from 88% to 82% in first seven months of FY19.

The reduction in the withholding tax collection had been compensated by the increase in collection through FBR’s own efforts, the member operations claimed.

Published in The Express Tribune, February 5^th, 2019.

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