Pakistan mulls new law to deter tax crimes443 views
By Tariq Ahmed Saeedi
KARACHI: Pakistan is mulling a new law to create deterrence against laundering of proceeds of tax crimes, said the central bank’s spokesperson, which may put a damper on the evasion of taxes in the cash-strapped economy.
Abid Qamar, chief spokesman at the State Bank of Pakistan told this scribe that the government has started “the process of bringing the serious criminal tax offences under the ambit of AML (anti-money laundering) Act, 2010 as required under the international standards and best practices.”
“AML Act (Amendment Bill) has been introduced in the parliament, which is presently being debated by the senate’s standing committee on finance and revenue,” Qamar said.
“Once the amendments are in place, laundering of proceeds of designated tax crimes would be dealt under the provisions of AML Act, 2010.”
A World Bank’s report says Pakistan has low tax to GDP ratio of nine percent. The study adds that around Rs700 to 1,000 billion of taxes are evaded annually.
Analysts said this is a staggering amount considering that the revenue-expenditure gap (fiscal deficit) of the country was Rs1,447 billion, 5.3 percent of the GDP for the fiscal year ended June 30, 2015. Total tax collection by the country’s apex tax body, the Federal Board of Revenue (FBR), stood at Rs2.58 trillion in the last fiscal year.
The FBR has detected fraudulent refunds, fake invoices, misuse of concessions, registration by dummy firms and multiple other forms of tax evasion.
A FBR study called for various strategies to eliminate the high incidence of tax evasion that include “removal of lacunae in the special procedures which enable evasion.”
Pakistan has included a number of criminal offences as predicate offenses under the AML Act, 2010.
Qamar said tax offences were not included.
He said the draft amendments include tax crimes related to direct and indirect taxes to effectively deal with the tax crimes.
Pakistan’s government told the International Monetary Fund (IMF) that the amendments are expected to be introduced into the existing AML ACT by end-November, 2015.
Notably, the enactment was earlier planned on –end-September, 2015. But, it was delayed “amid a significant legislative pipeline.”
The Washington-based IMF, which sanctioned $6.2 billion loan to Pakistan two years ago, is encouraging the South Asian economy “to ensure the financial monitoring unit’s access to asset declarations of public officials, and to provide guidelines to banks on the manner of reporting suspicious transactions related to tax evasion”.
“Going forward, staff [IMF] and the authorities [Pakistan] agreed that once the amendments are adopted, there is a need to upgrade the regulatory framework to mitigate…risks…with regards to the proceeds of corruption and tax crimes,” said the Fund in a report, released earlier this month.