Taxmen can seize assets held in other than owner’s names

Offers rewards, as high as 5% of value of confiscated properties, to whistleblowers

ISLAMABAD: The federal government on Monday notified the Benami Transactions Prohibition Rules that would finally make the law operational after a gap of two years, empowering taxmen to confiscate assets held in other than owners’ names.

The rules also offer rewards, as high as 5% of the value of confiscated properties and assets, to whistleblowers. The rules have immediately come into force, according to a notification issued by the Federal Board of Revenue (FBR). It took the FBR more than two years to notify nine-page rules and the matter was finally resolved after the push came from none other than Prime Minister Imran Khan.

With notification of rules, the Benami Transactions Prohibition Act of 2017 has come into force. The law authorises the federal tax authorities to confiscate all those properties that have been held in others’ name. It is generally presumed that such assets are either created through black or tax evaded money.

The taxmen will have the powers to confiscate both movable and immovable assets. The parliament approved the law in January 2017 and the president gave his stamp of approval the next month; but for over two years, bureaucrats and politicians delayed application of the law on flimsy grounds.

The rules have also specified the number of rewards for whistleblowers. The whistleblower is entitled to 5% of the benami property if its value is up to Rs2 million. In case the property's value is more than Rs2 million, the whistleblower will get Rs100,000 plus 4% of the value of the property.

On a property of over Rs5 million, the whistleblower will be given an award of Rs220,000 plus 3% of the value of the property. Anybody found guilty of keeping benami assets will face confiscation of property, rigorous imprisonment of up to seven years and a fine equal to 25% of fair market value of the property.

The price of benami property will be determined at fair market value, which is defined in the Income Tax Ordinance of 2001. Its section 68 says: “The fair market value of any property or rent, asset, service, benefit or perquisite at a particular time shall be the price which the property or rent, asset, service, benefit or perquisite would ordinarily fetch on sale or supply in the open market at that time”.

There has been a tendency among the politicians, bureaucrats, military officials and businessmen to retain their assets in others’ names. In the past, there have been cases where the assets are held in the names of drivers and personal servants.

In Rawalpindi, the FBR found that a property dealer has over one and half dozen undisclosed properties. When he was confronted by the FBR, he said the financier was his brother who lives abroad.

In Karachi, Rs87 million worth of vehicles has been registered in the name of a person who died in August 2016. Only in the last year, Rs50 million worth of vehicles were registered in the name of a deceased person, according to the FBR.

The FBR recently unearthed a case where the owner of a luxury car service provider in Karachi bought a property at a declared value of Rs110 million in the name of his driver whose monthly salary is just Rs26,500.

To curb this practice, the government has also decided to give tax authorities access to the family tree database of citizens in a bid to catch these dodgers.

In order to handle the affairs of benami assets, there will be an approving authority – the Commissioner Inland Revenue Service. The confiscation case will be initiated by an officer of deputy commissioner level. The administrator of the confiscated property will be assistant commissioner.

The adjudicating authority will comprise chairpersons and members. The chairperson will be entitled to pay and allowance of its pay scale and a monthly adjudicating authority allowance of Rs300,000.

The members will be entitled to Rs200,000 monthly allowance, in addition, to pay and allowance admissible prior to their appointment.

The affected persons can file appeals before an Appellate Tribunal, to be set up under the Benami law. The chairperson of the tribunal will also be entitled to Rs400,000 monthly allowance in addition to his regular salary. The members of the tribunal will be paid Rs300,000 monthly allowance.