Scrutiny: Tax Reforms Commission looking to tighten the noose
Proposal to confiscate domestic assets of those who have offshore tax havens.
Finance Minister Ishaq Dar chairing the first meeting of the newly formed Tax Reforms Commission at FBR on Saturday. PHOTO: PID
ISLAMABAD:
The Tax Reforms Commission (TRC) has proposed to amend an existing law to confiscate domestic assets of those who have stashed their wealth in offshore tax havens besides seeking promulgation of a new Act to prohibit holding property and businesses in others’ names.
The recommendation has come at a time when the PML-N government has failed to bring back $200 billion, which, it claimed, have been supposedly placed in foreign tax havens, mainly Switzerland.
The Foreign Exchange Regulation Act (FERA) needs to be amended in order to get hold of the black money held abroad, the TRC has proposed in its report that will be handed over to the government next week.
Through an administrative order, the government constituted the TRC in September last year with a mandate to review the taxation system and Federal Board of Revenue’s (FBR) administrative structure that has failed to deliver. Finance Minister Ishaq Dar has already assured that the TRC recommendations will be implemented.
The PML-N government introduced the Foreign Exchange Regulation Act during its first tenure, which tax and legal experts believe has helped in evading taxes through legal means.
TRC proposes a new section is to be inserted in the FERA. It provides that if any person holds any foreign exchange, foreign security or any immovable property outside Pakistan, the equivalent value of property in Pakistan can be seized.
The TRC is of the view that the foreign banks often do not cooperate and put conditions that are difficult to meet. In such a situation, the Enforcement officer now will have the power to seize Pakistani assets, it adds.
New act
The Commission has also proposed that a Benami Transaction (Prohibition) Act 2015 must be promulgated to prohibit holding property in benami.
In Benami transactions, the actual owners retain the assets in someone else’s name aimed at evading taxes and hiding ill-gotten wealth. The practice is very common among politicians, bureaucrats and businesspersons.
The commission has proposed that all such properties should be confiscated and the guilty persons may be put behind the bars for up two years.
Furthermore, such persons are proposed to be liable to a fine of up to 25% of the fair market value of the property held in benami. In addition, any person who willfully gives false information should also be liable to two years imprisonment and a fine of up to 10% of the market value of the property. The Bill provides for Special Courts to try such cases.
The proposed bill defines benami transaction as an arrangement where property is held by a person, other than in a fiduciary capacity, on behalf of another person who has paid for it, the transaction is made for a property in a fictitious name and the owner of the property is not aware of or denies knowledge of such ownership.
The bill proposes that the central government will confiscate all benami properties. Once a property is confiscated, all rights and title of such a property will rest completely with the central government and no compensation will be payable.
Published in The Express Tribune, May 3rd, 2015.
The Tax Reforms Commission (TRC) has proposed to amend an existing law to confiscate domestic assets of those who have stashed their wealth in offshore tax havens besides seeking promulgation of a new Act to prohibit holding property and businesses in others’ names.
The recommendation has come at a time when the PML-N government has failed to bring back $200 billion, which, it claimed, have been supposedly placed in foreign tax havens, mainly Switzerland.
The Foreign Exchange Regulation Act (FERA) needs to be amended in order to get hold of the black money held abroad, the TRC has proposed in its report that will be handed over to the government next week.
Through an administrative order, the government constituted the TRC in September last year with a mandate to review the taxation system and Federal Board of Revenue’s (FBR) administrative structure that has failed to deliver. Finance Minister Ishaq Dar has already assured that the TRC recommendations will be implemented.
The PML-N government introduced the Foreign Exchange Regulation Act during its first tenure, which tax and legal experts believe has helped in evading taxes through legal means.
TRC proposes a new section is to be inserted in the FERA. It provides that if any person holds any foreign exchange, foreign security or any immovable property outside Pakistan, the equivalent value of property in Pakistan can be seized.
The TRC is of the view that the foreign banks often do not cooperate and put conditions that are difficult to meet. In such a situation, the Enforcement officer now will have the power to seize Pakistani assets, it adds.
New act
The Commission has also proposed that a Benami Transaction (Prohibition) Act 2015 must be promulgated to prohibit holding property in benami.
In Benami transactions, the actual owners retain the assets in someone else’s name aimed at evading taxes and hiding ill-gotten wealth. The practice is very common among politicians, bureaucrats and businesspersons.
The commission has proposed that all such properties should be confiscated and the guilty persons may be put behind the bars for up two years.
Furthermore, such persons are proposed to be liable to a fine of up to 25% of the fair market value of the property held in benami. In addition, any person who willfully gives false information should also be liable to two years imprisonment and a fine of up to 10% of the market value of the property. The Bill provides for Special Courts to try such cases.
The proposed bill defines benami transaction as an arrangement where property is held by a person, other than in a fiduciary capacity, on behalf of another person who has paid for it, the transaction is made for a property in a fictitious name and the owner of the property is not aware of or denies knowledge of such ownership.
The bill proposes that the central government will confiscate all benami properties. Once a property is confiscated, all rights and title of such a property will rest completely with the central government and no compensation will be payable.
Published in The Express Tribune, May 3rd, 2015.