Benami law

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THE government appears to be gearing up to implement a law providing stiff penalties for an individual holding benami properties, or assets, in the name of another for concealment purposes. The measure is necessary considering how prevalent the practice of holding benami property — whether movable of immovable — is in this economy, and the significant role that it plays in enabling tax evasion, money laundering and terror financing. Eliminating these menaces is a critical priority for restoring the credibility of Pakistan’s financial system, giving the tax machinery a proper picture of the incomes and transactions within the economy, and shutting down channels for the flow of illicit funds, whether proceeds of crime or financing of terror activities.

Also Read: Assets in names of kin to be treated as Benami transactions

The priority is undeniable, but caveats enter the picture when one considers the potential for abuse that such a law brings with it. As it stands, the rules that have been notified by the government give tax officials sweeping powers to attach property, hold records and search the premises of those who are alleged to be holding property in the name of another. The law also provides for stiff prison terms for those found guilty of the practice, as well as those who provide wrong information during prosecution — complete with minimum and maximum sentences. These are enormous powers to entrust the tax bureaucracy with, especially considering the widespread allegations of corruption and abuse of power that are routinely levelled against tax officials. How does the government intend to ensure, in a reliable and credible way, that these powers will not be abused? The question becomes even more important considering the severity of punishments enshrined in the law, and the kind of damage that can be done to somebody who has been wrongly victimised by the use of these powers. Eventually, it will need to be recognised that punitive measures alone will not be enough to stamp it out. The culture of concealment and the accommodation of such practices need to change, as does the relationship between the taxman and the taxpayer. It will take far more than legal changes to bring this about. Other institutions of the state will also need to play their role in helping illuminate benami practices, as well as raising awareness. The law needs to be followed up with other steps to ensure that the tax authorities and the taxpayers are not left to decide this important matter alone among themselves.

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Published in Dawn, March 15th, 2019

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