Effective enforcement of tax laws: Proposed Benami law to ultimately render assistance to FBR

The proposed "Benami Transaction (Prohibition) Bill, 2016" is not a tax law, but a separate law which would ultimately help the Federal Board of Revenue (FBR) for more effective enforcement of tax laws in the country.
Speaking as a guest in "Paisa Bolta Hai" with Anjum Ibrahim, on AAJ News here on Sunday, FBR Member and Spokesman Dr Muhammad Iqbal said that the proposed "Benami Transaction (Prohibition) Bill, 2016" is a separate law which has its own penalty and adjudication/prosecution regime. The law has its own penalties, appellate authorities and confiscation/adjudication system. However, there would be a lot of contribution of the FBR in the enforcement of the law.
FBR Member said that the Benami law is not a part of the Income Tax Ordinance 2001. The said proposed law is not part of the fiscal laws administered by the FBR. It has separate provisions, but it would benefit FBR for the tax purposes. Ultimately, it would facilitate tax authorities in the enforcement of tax laws. For example, when the FBR is examining investments, it has been observed that certain investments have been made on other names. Thus, the proposed Benami law would help FBR in investigation of cases for tax purposes.
Dr Iqbal added that the proposed "Benami Transaction (Prohibition) Bill, 2016" has been drafted by the FBR and presented before the Parliament. The FBR has incorporated confiscation and other provisions in the proposed law.
Tax Lawyer Waheed Shahzad Butt said that unfortunately, millions of bank accounts, immovable properties and business transactions are "Benami" in Pakistan, while the proposed law has been criticised by the powerful lobbies which are ultimate beneficiary of Benami transactions, that's why they did not agree to a clause that Benami properties would be liable to confiscation, and suggested to change it with a heavy penalty.
It is practically and theoretically incorrect that Benami Law has nothing to do with the Income Tax Law and it must be treated as stand alone. At present provisions of Section 111 of the Income Tax Ordinance, 2001 is dealing with the tax evaders having incomes from undisclosed sources commonly known as concealed income, he added.
On the issue of Companies Global Register of Beneficial Ownership under new Companies Ordinance 2016, Member Tax Reform Commission (TRC) Ashfaq Tola stated that the issue of disclosures of beneficial ownership by companies was an old issue since new Companies Ordinance was under review. If financial interest or beneficial ownership is being disclosed under the new law, then what is the issue? When we suggest measures for improving documentation and good governance, why people preaching these things are against the proposed measures? There is no sound reason to talk against the new law.
There are a lot of tax heavens in the world and we do not know that how much information is going to be come out from those tax heavens, he said.
Even certain clients of chartered accountant firms complained about disclosures of beneficial ownerships. However, we ask them if you do not have any offshore company in tax heavens, then what is wrong?
Obviously, there is always room for improvement in the light of suggestions of stakeholders in the Companies Global Register of Beneficial Ownership law, he maintained.
Tola added that it would be binding on a foreign company operating in Pakistan to provide complete information of its directors/officers and beneficial owners under the new law. The SECP will maintain a "Companies Global Register of Beneficial Ownership" which will have a complete record.
Waheed Shahzad Butt informed that first time in Pakistan a revolutionary law has been enacted through Companies Ordinance, 2016. It would allow SECP to seek details of beneficial owners of foreign companies including offshore companies incorporated in Pakistan.
New revolutionary law would allow SECP authorities to check the details of owners and investors not only a local company but also in any foreign or offshore company registered in Pakistan unfortunately present SECP law does not allow the SECP to inquire about the owners of a foreign company in Pakistan, he said.
Local companies registered with SECP have to provide details of all investors, having more than ten percent shares in the company, while the details of investors in a foreign company can be obtained anytime by SECP after the enactment of new Companies Ordinance.
Under the new law, every shareholders, directors and officers of the companies have to report their beneficial ownership or any other interest outside Pakistan. SECP shall maintain a unique document/record known as "Global Register of officers and beneficial owners of the companies having beneficial ownership in local or foreign companies. The information will be reported by the company to the Registrar SECP along with the Annual return of the company; however for the first time such information will be reported through a special return on a prescribed form within a stipulated time frame.
Global Register of Beneficial Ownership will be the first step towards strict documentation and reporting while in second stage the FBR would come into play and they can use the information available with SECP to evaluate/analyse the sources of investment made by the Pakistani individual in offshore companies, Waheed Butt said.
SECP do not have strong powers to forcefully enforce this unique type of documentation measure, however, FBR has vast powers to enforce and evaluate the issue of investment made by Pakistani individual in offshore companies.
When asked whether Marium Nawaz will give her papers to the SECP about any beneficial ownership in offshore company after passage of this law, tax lawyer said people have to submit details through a special return. They can submit details about their companies to the SECP. They may present the documents in courts.
It is a declaration that who has ownership in a foreign company and who is beneficiary in the company.
There are very minor penalties for non-compliance and it is very difficult for the SECP to strictly enforce the law relating to the Companies Global Register of Beneficial Ownership.
About FBR's role in implementation of the law, FBR Member Dr Iqbal said that the FBR has its own requirements. If we talk about an individual, he has to file wealth statement to declare total assets and liabilities inside Pakistan and aboard. The disclosure requirements are available in the law which has to be submitted in the wealth statements, he added.