ISLAMABAD: Taking measures in response to a 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’s office said it is possible that Federal Board of Revenue (FBR) may earn the confidence of expats through recommending amendment in the law.
According to media, an applicant, Majid Ali Chaudhry from abroad approached the Grievance Commissioner for Overseas Pakistanis (GCOP) Hafiz Ahsaan Khokhar in the Federal Ombudsman’s office. The applicant said that remittance other than banking channels has not been regularized as the Federal Board of Revenue doesn’t entertain remittances sent through MoneyGram and Western Union in terms 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 MoneyGram and Western Union, which have been regulated under the State Bank of Pakistan (SBP).
Expressing his concern the applicant said that if the FBR pays no heed to legalize the remittances sent through money transfer companies, there is a strong possibility that remittances would be sent through illegal instrument ‘Hundi’ which will definitely cause a substantial amount of dent in the national kitty.
Revealing the plea to Governor SBP and Chairman FBR, GCOP Khokhar conducted hearing of both the agencies’ representatives for resolving the issue.
Representative of the SBP informed the GCOP that matters pertaining to classification of foreign remittances made through exchange companies as income under Income Tax Ordinance 2001 do not fall under the regulatory domain of the SBP.
The central bank apprised GCOP Khokhar that under “Section 111 (4) of the Income Tax Ordinance 2001, the FBR accepts ‘Proceed Realization Certificates’ (PRCs) issued by banks and banks issue PRCs for home remittances received through all overseas banks and money transfer companies including MoneyGram 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 the 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 SBP.
GCOP Khokhar called comments from the FBR who told that a meeting was held in pursuance of the directions of the Wafaqi Mohtasib saying the SBP 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 FBR also informed that impact of SBP’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 bills in the legislature. However, without prejudice to the above, the matter at hand shall be considered during the upcoming budgetary exercise”, concluded the FBR.