FBR plans crackdown against benami transactions

Domestic black money

KARACHI: The Federal Board of Revenue (FBR) has planned to crack down against people involved in benami transactions in a bid to check black money in the domestic economy, tax officials said on Monday.

“Authorities have identified a number of people through scrutiny of transactions made in immovable properties, cash transfers, purchase of motor vehicles,” a senior official said. “They are found involved in benami transactions and dodging tax authorities for concealing their taxable income.”

The official, reluctant to disclose the actual number of identified persons, said “those are in thousands in number.”

The government is presenting benami transaction bill before the parliament next month for a formal approval.

Under the draft benami transaction bill, the FBR officials have been empowered to take action against those persons who made transactions in someone else’s name.

The official said parliamentary approval is necessary for taking any legal action against such tax dodgers.

He said the tax authorities have issued 275,000 notices in May for declaring income, of which a few of them made compliance, but the majority were those persons who had no such income to purchase immovable property, motor vehicle or making banking transactions.

Through the Finance Act, 2016, an amendment has been made to the Income Tax Ordinance, 2001, under which the tax authorities have been empowered to ask people about the source of their income earned during the last 10 years, if they have failed to file income tax returns for the last five years.

The official said the FBR has proposed amendment to enforce income tax return from the date of discovery, which would empower the authorities to take action against people during the last six decades.

However, the government has restricted the tax authorities for the last 10 years, the official added.

The Tax Reform Commission, in its recommendations in May 2015, had advised the government to introduce Benami Transaction Act on an urgent basis in order to discourage tax evasion.

The commission suggested: “Any person enters into benami transaction should be liable to tax at the rate of 25 percent of the fair market value of the property held in benami.”

The benami transactions have been defined as investment of black money. Benami transactions are a conduit to channelise black money earned through corrupt and illegal practices and basically and is untaxed money.

The TRC said that a substantial parking place of ill-gotten wealth is placed in the real estate sector due to the difference in collector rate of the property and fair market value, while a good percentage of this investment is benami.