KARACHI: The proposal of tax reform commission to plug revenue leakage and bring all segments having taxable income into tax net has not implemented yet.
The tax commission in its report and recommendations submitted to finance ministry in May 2015 for subsequent implementation.
The tax commission had realized the quantum of black money in the system and outflow of plundered money for depositing in offshore bank accounts.
In order to prevent outflow of illegal money and routing back through available channels having legal shelters, the commissioner recommended amendment in Foreign Exchange Regulation against the black money held abroad.
It said that the Foreign Exchange Regulation Act (FERA) needs to be amended in order to get hold of the black money held abroad.
The commission recommended 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. Prescribed procedure has to be followed for the seizure.
Consider a situation where a person is holding assets in a tax haven in violation of FERA. When Enforcement Directorate wants to seize the foreign assets, the Tax Haven Government and its banks – may not co-operate.
In such a situation, the Enforcement officer now will have the power to seize Pakistani assets.
This power of seizure under FERA is in addition to the penal action under Income tax Ordinance 2001 and penal action under FERA.
This provision is drastic. It provides that if the Authorized officer has “reason to believe” that the foreign asset is “suspected to have been held in contravention of FERA …” the consequences of seizure will follow.
Any penal consequence should follow if the contravention is proved. One cannot seize property if an officer has mere reason to believe and he just suspects a contravention. Penal consequences should follow only after the contravention is established.
Such differences of interpretation should not lead to a suspicion or conclusion that it is a contravention; and it should not lead to seizure of property.
The seizure rules should apply only in case of serious contraventions like hawala transactions. It may be noted that the phrase “Reason to Believe” has been considered judicially. It cannot be a mere suspicion by the officer. He must have a valid reason; and the information for the reason should be on his file when he passed the order.
The provisions of Anti-Money Laundering Act 2010 are far more stringent than FERA. However Anti- Money Laundering Act 2010 also provides that property can be seized provisionally. Only after the crime in respect of which the guilt is established, the seizure becomes final. Till that time the seizure is not final.
