WASHINGTON: The government will prepare and submit a draft legislation against benami transactions to the National Assembly by the end of January, according to a document submitted to the International Monetary Fund (IMF).

This was stated in a memorandum of economic and financial policy as part of a letter of intent (LoI) sent by the Ministry of Finance to IMF and published on the Fund’s website. The letter, sent on Sept 15, related to the eighth review under the three-year economic reform programme.

The IMF’s executive board last month approved the record eighth review and approved the release of $504 million tranche of a loan extended to Pakistan under the Extended Fund Facility (EFF) programme.

Benami (nameless) accounts — in which assets are held in the name of a person who is not the true beneficiary — are commonly used to evade taxes.

The government is trying to strengthen the culture of taxation by pursuing tax evaders, avoiding tax amnesty schemes, and adopting a reform programme for tax institutions.

“We will further improve our enforcement efforts on non-filers (of tax returns) who have the potential to contribute at least the average tax paid by currently registered taxpayers and especially large corporations and high wealth individuals,” the finance ministry said in the memorandum.

The government informed the IMF that with the number of audits increasing from 3,000 in 2010-11 to 62,335 in 2012-13, additional tax assessments surged from Rs1bn to Rs50bn over the same period.

The IMF was informed that the recent efforts to enhance tax administration have yielded gains, but the gap between potential and actual tax collections remains. The finance ministry met its target to issue 200,000 notices by end-June 2015 to bring more potential taxpayers into the revenue base. This helped increase the number of income tax return filers from 722,000 on July 1, 2013 to 912,000 as of Aug 4, 2015.

Moreover, the government assured the IMF to continue supporting the poor through the Benazir Income Support Programme (BISP).

On monetary policy, the ministry’s letter stated that the government stance was in consistent with current economic conditions. “With declining core and headline inflation, we lowered the reverse repo rate by cumulative 350 basis points since November 2014.”

The finance ministry said it is protecting financial stability by reinforcing the regulatory and supervisory framework. The revised Securities and Exchange Commission of Pakistan (SECP) Act to enhance its regulatory power will be discussed with the IMF and will be considered by the Council of Common Interests before being submitted to parliament for enactment by April 2016.

Published in Dawn, October 7th, 2015

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