ISLAMABAD, July 5: The government would soon introduce legislation to eliminate the abuse of “benami” practices in banks and in concealing property ownership.
Informed sources told Dawn here on Friday that the ministries of finance and law & parliamentary affairs have been directed to ensure the finalization of the draft law to be submitted in the parliament for approval by December 2003 in order to get rid of the abuse of benami practices.
The expression benami refers to the practice of holding property/assets in the name of one person for the benefit of another. However, benami is often aimed at concealing ownership of assets acquired through illegal means, defrauding creditors, and/or evading payments of government fees, charges or taxes.
Pakistani courts have recognised this concept as a custom and enforced the intention of the parties. Nonetheless, under the existing law, if the real owner is a defaulter or a creditor, the government can have recourse against the owner’s property held benami.
The IMF has proposed the setting up of a task force having representatives of the ministry of finance, provincial governments, Central Board of Revenue (CBR), State Bank of Pakistan (SBP), Securities and Exchange Commission of Pakistan (SECP) and the National Accountability Bureau (NAB) to effectively deal with the issue of benami practices.
“A big number of banks accounts are on fake names the purpose of which is to conceal real incomes and the issue needs to be taken seriously,” said Dr Ashfaque Hasan Khan, Economic Adviser to the Ministry of Finance.
Dr Khan, who is also the Director General of Debt Coordination Office told Dawn that the government wanted to introduce the concept of global income in which people should not be allowed to hide their assets by keeping them on other names or fictitious names.
In order to curb abuse of the benami practices, the task force will organize consultations with the provinces to secure their concurrence for reform. The provinces were expected to consult relevant stakeholders such as bar association, chambers of commerce, trade association, agricultural associations, real estate sector, etc. The task force will submit a report to the cabinet not later than end-October 2003, with recommendations to reform legislation. Following approval of the cabinet, in accordance with the constitutional requirements, the draft law will be submitted in the parliament by end 2003.
With respect to both benami and ownerless property, according to the IMF, the law should allow the existing holders a period of one year from the date of its promulgation to transfer the said property into their own names. After expiration of the immunity period, all property should vest in the person in whose name the property is held (the Benamidar). The “real” owner of the benami property will no longer have the legal right to claim the property from the Benamidar.
Regarding benami property, the loss of legal right to the property would be the only deterrence the proposed law shall place on a holder of benami property. However, regarding ownerless property, penal sanctions (imprisonment and/or fines) should be imposed in addition to existing laws.
The property that is declared ownerless will vest in the government. The High Court is expected to be given the jurisdiction to determine whether a property is ownerless.