Pakistan’s Anti-Benami Initiative (ABI) and Benami Adjudicating Authority (BAA) of the Federal Board of Revenue (FBR) are reportedly struggling to effectively tackle tax evasion, particularly among the country’s wealthiest individuals.
Despite establishing the Benami Law in 2017 and activating the ABI and BAA since 2019, these bodies have been unable to successfully include the wealthiest individuals and companies, who own a significant portion of the nation’s capital, in the tax net. These individuals, holding multibillion-rupee assets, have avoided scrutiny by naming their assets against others. The report indicates that the BAA, after an initial period of effective operation from July 2019 to December 2020, has since failed to address these issues substantially.
The extent of wealth disparity in Pakistan is highlighted by the Gini-Coefficient, with the top 1% of the population holding almost 22% of total wealth, while the bottom 50% hold only 4%. This stark inequality raises questions about the effective tax contribution of the wealthiest 1% and their methods of concealing transactions, such as through benami accounts and undervaluation of assets.
The report points to a significant gap between account holders and return filers, indicating a potential misuse of benami laws. Commercial banks, in particular, pose a challenge in bridging the gap between these two databases.
Operational and Legal Hurdles in Implementing Benami Laws
Establishing the Benami Adjudicating Authority and the Directorate General Anti-Benami Initiative (DG-ABI) was met with administrative challenges, including the delayed framing of operational rules and allocating necessary resources. Despite receiving 81 references from Benami Zones and finalizing 59 cases under the Benami Act 2017, the authority has faced difficulties fully implementing its mandate. The cases involve a variety of benami assets, including immovable properties, vehicles, shares, and bank accounts. As of the report, 22 cases remain pending, most nearing the final disposal stages.
The BAA has established coordination with the National Accountability Bureau (NAB) and the State Bank of Pakistan for cases involving multi-party interests. Despite these efforts, the overall effectiveness of the ABI and BAA in curbing tax evasion and wealth hoarding remains a matter of concern. The report concludes with a note that the FBR did not respond to inquiries regarding this issue as of Friday night.
