Daily Times

Taking measures in response to plea of an overseas citizen of Pakistan, seeking benefits of certain provision of Income Tax Ordinance 2001 regarding regularization of remittances sent through money transfer companies, Federal Ombudsman office made it possible that Federal Board of Revenue will earn confidence of expats through recommending amendment in the law.

An applicant, Majid Ali Chaudhry from abroad approached the Grievance Commissioner for Overseas Pakistanis (GCOP) in the Federal Ombudsman office, Hafiz Ahsaan Khokhar saying their remittance other than banking channels have not been regularized as the Federal Board of Revenue doesn’t entertain remittances sent through Money Gram and Western Union in term of ‘foreign income’.

The applicant also claimed that other money transfer companies were not operating in Pakistan while the Income Tax Ordinance 2001 was promulgated, adding that currently expats used to send remittances through banking channel besides Money Gram and Western Union which operations have been regulated under State Bank of Pakistan.

Expressing his concern the applicant said that if the Federal Board of Revenue pay no heed to legalize the remittances sent through money transfer companies, there is strong possibility that remittances would be sent through illegal instrument ‘Hundi’ which definitely will cause a substantial amount of dent in the national kitty.

Revealing the plea to Governor State Bank of Pakistan and Chairman Federal Board of Revenue GCOP advocate Supreme Court Hafiz Ahsaan Khokhar conducted hearing of both the agencies’ representatives for resolving the issue.

Representative of the State Bank of Pakistan informed the GCOP advocate Supreme Court Hafiz Ahsaan Khokhar that matter pertains to classification of foreign remittances made through exchange companies as income under Income Tax Ordinance 2001 doesn’t fall under the regulatory domain of State Bank of Pakistan.

The Bank apprised the GCOP Hafiz Ahsaan Khokhar, “Under Section 111 (4) of Income Tax Ordinance 2001, Federal Board of Revenue accept ‘Proceed Realization Certificates’ (PRCs) issued by banks and banks issue PRCs for home remittances received through all overseas banks and money transfer companies including Money Gram and Western Union”.

“We are of the view that even foreign exchange proceeds of remittances disbursed by exchange companies are received by Pakistani banks, these remittances should also be recognized by FBR under Section 111(4) of Income Tax Ordinance – It would be appropriate to amend the Income Tax Ordinance to include PRC issued by Exchange Companies and Post Offices for the remittances”, stated the Central Bank.

Advocate Supreme Court GCOP Hafiz Ahsan Khokhar called comments from the Federal Board of Revenue who told that a meeting was held in pursuance of the directions of the Wafaqi Mohtasib saying the State Bank of Pakistan regulations on Customer Due Diligence (CDD) government banking companies under AML/CFT Regulations for Banks and DFIs and money/value transfer companies under the Exchange Companies Manual 2018 were discussed. The representative of the Federal Board of Revenue also informed that impact of State Bank of Pakistan’s proposed changes in light of FATF regulations was also discussed.

“In light of the discussion held in the aforementioned entities governed by separate regulatory frameworks. The benefit of Section 111(4) of the Income Tax Ordinance, 2001 has been restricted to Scheduled Banks. Extension of such benefit to money transfer companies is the sole prerogative of the Parliament and amendment in law can only be brought about through the introduction of money bill in the legislature. However, without prejudice to the above, the matter at hand shall be considered during the upcoming budgetary exercise,” concluded the FBR. Hafiz Ahsaan Ahmad Khokhar Senior Advisor/ Grievance Commissioner for Overseas Pakistanis said with amendments in law, would have facilitation for millions of overseas Pakistanis and it would also encourage sending money to Pakistan through legal channels.