The government has decided to amend income tax laws to take firm legal action against the tax evaders and people who conceal foreign accounts. A bill was presented in the lower house of the parliament on Tuesday to empower the Commissioners of Inland Revenue Services Department of Federal Board of Revenue to freeze the domestic assets of individuals who are likely to dispose off their assets to avert the risk of penalty. The proposed legislation also includes some sections that deal with the concealment of offshore accounts.
Under the proposed amendments in the income tax laws, tax evasion through offshore accounts will be an offence liable for punishment in the shape hefty fines and jail sentence up to seven years term. The amendments are reported to be in consonance with certain recommendations of Financial Action Task Force (FATF) pertaining to tightening of the anti-money laundering regime. The amendments shall be made part of Finance Act, 2019.
It remains to seen that how far the new legislation about amendments in tax laws, if passed, will dilute the application of certain sections and clauses of a previous legislation titled: “Protection of Economic Reforms Act 1992.”It was passed and enacted in July 1992 in the first tenure of Nawaz Sharif government. Section 4 of the Act ensures unbridled freedom to bring, hold, and sell foreign currency and take it out of the country. It gives exemption from making declaration at any stage about transactions of foreign currency and its transfer. Section 5 of this Act grants immunity to foreign currency accounts holders against any investigation by the Income Tax Department or any other tax authority. Clause 2 of the same section grants exemption to balances in foreign currency accounts and income therefrom the levy of wealth tax and income tax. Clause 4 of this section bars the State Bank of Pakistan from imposing restrictions on deposits in and withdrawal from foreign currency accounts.
The last PML-N government ignored the warning of FATF that Pakistan will be formally placed on greylist if it does not tighten its anti-money laundering and counterterrorism financing regimes. A short leash of four months was given in February, 2018 for appropriate actions in this regard. But former Interior Minister Ahsan Iqbal described the FATF concerns as politically motivated, and in his views, it were aimed at destroying the economic progress of the country. Former Finance Minister Miftah Ismael claimed that anti-money laundering regime was robust. Pakistan was formally placed on the grey list in June last year and 27 points action plan was provided for compliance to strengthen the anti-money laundering and counter terrorism financing regimes till September this year if it really wants to be removed from the greylist.
Money laundering and transfer of money abroad without paying taxes thereon has damaged the image of the country and it is incumbent upon the opposition, politically and morally, to support any legislation that buttresses anti-money laundering regime. The provisions of UN Security Council Resolutions numbering 1267 and 1373 are binding on all member countries. The political leadership of opposition political parties should extend cooperation to the government in the parliament for the passage of proposed legislation which envisages amendments in the Income Tax Laws in addition to covering issues relating to the concealment of offshore accounts.
