Commission proposes changes in tax laws to clamp down on evasion

KARACHI: The Tax Reform Commission (TRC) has proposed the government to amend existing laws to tackle tax avoidance and outflow of the capital from the country, a senior official said on Tuesday.

“We have recommended changes in three main laws to avoid Panamagate like scandals in future,” Masood Ali Naqvi, Chairman, TRC told The News on the sidelines of CFO Conference -2016.

Naqvi said the TRC has proposed changes in Benami transactions; Foreign Exchange Regulation Act; and laws related to declaration of foreign assets to curb a rising tide of tax evasion and avoidance.  The TRC recommended the government to amend laws in the forthcoming federal budget.

“The suggestions have already been discussed with the Finance Minister and tax authorities,” Naqvi said. “The TRC will brief the Senate on its recommendations on Wednesday (today) to prevent illegal outflow of hard earned money by Pakistanis.”

The government is under pressure to launch an inquiry into the extent of illicit financial transfers from the country and ways to stop the flow following exposure by Panama papers, which carry names of around 200 rich Pakistani, including family members of the Prime Minister Nawaz Sharif.

The government is set to investigate individuals suspected of stashing away ill-gotten wealth in offshore bank accounts.

Naqvi said the TRC has proposed the government to allow “voluntary declaration to Pakistanis about their foreign assets.” “However, initially it is recommended that the public office holders should be exempted from this in order to avoid political conflicts.”

The voluntary foreign asset declaration is practice in a number of countries, including neighbouring India.

The finance minister, also recently directed the Federal Board of Revenue (FBR), State Bank of Pakistan (SBP) and Securities and Exchange Commission (SECP) to suggest changes in laws to prevent illegal outflows of capital from the country.

TRC was constituted by Finance Minister Ishaq Dar about two years back to recommend measures to reform the tax collection as well as tax machinery.

In May 2015 the TRC submitted its preliminary recommendations to the government and recently it submitted its final report.

“The government has accepted about 80 percent recommendations of the TRC to bring revolutionary changes in the existing tax system,” Naqvi said “Some of the recommendations have already been implemented, which was monitored by an implementation committee headed by Haroon Akhtar, Advisor to Prime Minister on Finance.”

Naqvi said the revenue collection of the FBR will increase threefold if the government implements the recommendations of the TRC in true spirit. “The TRC has also given proposals on broadening of the tax base and improving administration of the FBR.”