There has been a noticeable development regarding the “misuse of the gift scheme” where Rs. 102 billion were allegedly laundered while avoiding taxes. The Federal Board of Revenue has sent out notices to 2,785 wealthy individuals who had received millions or billions of rupees and described them as “gifts” in their yearly statements.

According to sources, all people who were previously identified have now been asked to explain their source of income.

Read More: Pakistani Elite are Using Gift Schemes for Money Laundering

Current tax law allows gifts to be exempt from taxes. Thousands of wealthy individuals are allegedly using the option as means to transfer income, assets and wealth while legalising black money without paying any taxes at all.

Investigation Underway

Director General of Intelligence and Investigation, Shad Mohammad, has confirmed that notices have indeed been issued to the people who received expensive gifts.

He added that during the first stage, the source of income were not evident after cross-verification of the identified people’s tax returns. “We are closely coordinating with the regional tax offices (RTOs) for enforcement of these notices,” Shah Mohammad stated.

The RTOs will now go through these cases and ascertain where these expensive ‘gifts’ came from legitimate sources and whether they were used for tax evasion.

The process started last year when the aforementioned cases were unearthed after detailed scrutiny of statements with “gift back arrangements”. Most of these people had submitted statements with large amounts of income but only nominal amounts as taxes. Some people had net assets over hundreds of millions of rupees yet no noticeable source of income.

The anti-money laundering cell of Intelligence and Investigation has launched a proper investigation against the identified people for the fiscal year 2016.

Breakdown of the Gifts Received

Three individuals had declared gifts of over Rs 1 billion, the biggest amount being Rs. 1.7 billion. While 8 people had received gifts worth between Rs 500 million and Rs 1 billion.

Third category includes 97 people with gifts between Rs 200 million and Rs 500 million and another 97 individuals who mentioned gifts between Rs 100 million and Rs 200 million. 280 people got Rs 50 to Rs 100 million in gifts while the remaining 2,348 identified gifts around Rs 10 million to Rs 50 million.

Consequences for Such People

In cases where it is found that gifts were used for tax evasion, the assets of the individuals will be confiscated by the FBR under Anti-Money Laundering Act 2010 and criminal cases will be filed in the Special Court of Customs and Taxation. Such individuals might be liable to punishments of up to 10 years in prison, heavy fines and forfeiture of all of their properties.

Via: Dawn