The Benami Act is finally coming into force — after a delay of more than two years — to enable the tax authorities to curb proxy transactions in line with the government plan to document the national economy. Approved by parliament in January 2017 and given nod by the then president the following month, the law effectively remained discarded to the cold storage on flimsy grounds — rules for implementing the law could not be finalised. Faced with a severe cash crunch amid the crises relating to current account and budgetary deficits, the incumbent government has decided to make the Benami Transactions (Prohibition) Act, 2017 operational. The decision, according to the FBR, was taken by the Prime Minister during a meeting last week, and implementation rules would be notified by the end of the ongoing week after final vetting by the law ministry.
The law prohibits all persons from entering into Benami transactions, and allows the federal government to confiscate a Benami property which is defined as an arrangement where property is held by a person — other than in fiduciary capacity — on behalf of another person who has paid for it; or the transaction is made for a property in a fictitious name; or the owner of the property is not aware of or denies knowledge of such ownership. The basic objective of the law is to deal with the problem of tax evasion and black money; target transactions carried out in other people’s name; to empower the government to restrict the right to recover or transfer property held in Benami; and ensure if a person enters into a Benami transaction to evade tax or avoid payment to creditors, the ultimate beneficial owner and persons who abet or induce any person to undertake Benami transaction are dealt with under the law.
With the law now available and rules implementation being notified too, the onus is on the authorities to bring the law into full force and do away with the parallel black economy in due course.
Published in The Express Tribune, February 6th, 2019.