Cash, gold smugglers to face heavy penalties, jail

ISLAMABAD: President Arif Alvi has promulgated the Tax Laws (Second Amendment) Ordinance 2019 for slapping substantial increase in penalties on cash currency smugglers on confiscated amount of over $10,000 and imprisonment up to 14 years in order to comply with FATF conditions.

Many have termed it as “controversial move” despite the claim of the FBR that the president had signed this ordinance on December 27, 2019, however, the government made it public when session of both Houses of Parliament (National Assembly and Senate) was summoned and were already underway when the FBR was briefing reporters on salient features of the Tax Laws (Second Amendment) Ordinance 2019.

Briefing reporters here at the FBR headquarters on Wednesday, the FBR Member Inland Revenue (Policy) Dr Hamid Ateeq Sarwar, Member Customs (Policy) Javed Ghani and Member IT Asim Ahmed stated that the presidential ordinance would be laid down before the National Assembly today (Thursday). Being a finance bill, there is no problem to pass it from the National Assembly but keeping in view requirement of Financial Action Task Force (FATF), it was promulgated through ordinance, Dr Hamid Ateeq Sarwar said.

Under the ordinance, the FBR has divided currency carriers into different categories. Under the law, the foreign currency up to $10,000 is allowed for a person at time of departure from Pakistan. The ordinance proposed to confiscate foreign currency from $10,001 to $20,000. In case of foreign currency from $20,001 to $50,000, it imposed penalty and imprisonment up to two years. The foreign currency from $50,001 to $100,000 the penalty imposed is four times of the confiscated amount and imprisonment up to seven years. On the smuggling of precious stones and jewellery, on smuggling of 15 tola gold/jewellery, itwill be confiscated and the equivalent amount of penalty could be imposed.

Dr Hamid Ateeq Sarwar said the penalties were jacked up to bring it in line with FATF requirements. The same level of penalties, he said, were imposed by India and other regional economies in line with FATF conditions.

The FBR Member Customs (Policy) Javed Ghani stated that certain legal changes were made into the Customs Act, 1969 through the presidential ordinance.

(i) After section 3CC, the following new section is proposed to be inserted:

“3CCC. Directorate General of Law and Prosecution: The Directorate General of Law and Prosecution is being proposed for the reason that in all the collectorates and directorates there are a number of cases which are framed for evasion of duty/taxes but owing to excessive work load and lack of expertise on the prosecution side the cases are not properly defended at subsequent legal fora. The Directorate General of Law and Prosecution will be established with specific power to handle legal issue and equipped with staff expert in handling legal issues.

(i) The penal clause 47A of section 156(1) provides for fix penalty @ Rs.5000/- for initial five days and thereafter @ Rs.10000/- per day upto a maximum limit of Rs.100000/- in case GD is filed after ten days of the date of arrival of goods into Pakistan. This clause was inserted to realize stuck up government revenue as importer will suitably discharge their liabilities to avoid their penalties. However, bonafide person need to be excluded from this penal clause. However, the intent of the proposed amendment is to exclude the goods imported or received as gift by individuals without NTN or STRN through courier or air cargo, diplomatic cargo and imports made by government agencies.

(ii) Changes are being proposed in section 156 to penalise persons carrying foreign currency. Previously, a person carrying foreign currency beyond the permissible amount of $10,000 was being prosecuted. It is now being proposed by means of varying slabs being taken by passengers ,ranging from $10,000- $200,000 and above and accordingly proposing varying degrees of penalties from a mere fine and then imprisonment upto fourteen years depending on the amount of currency apprehended by the authorities. Similarly slabs for smuggling of gold, platinum and silver has been proposed along with their varying degrees of fine and imprisonment depending on the quantum of precious metals.

(v) Owing to surge in smuggling activities and knowing that smugglers as well equipped, it is being proposed that section 164 may be suitably amended empowering Customs officials to fire in the line of duty.

(vi) Currently, Section 185A specifies the provisions for cognisance of offences by special judges. It is proposed that a time period of six months may be fixed for the finalisation of proceedings in criminal cases because cases keep on lingering without any outcome for years. No time limitation in decision of the case also accords time to the investigating officers to submit final challan without a time limit which aspect weakens the case as the time passed by.

(vii) Section 194 of the Customs Act, 1969 provides for the constitution of a Customs Appellate Tribunal by the federal government which is competent to adjudicate upon appeals filed against orders passed by the collector (appeals). The said section specifies various pre-requisites for appointment as a judicial or technical member and empowers the federal government to appoint chairman of the Customs Appellate Tribunal. In order to complement revenue collection efforts by FBR, streamline the affairs of the tribunal(s), bring about greater transparency in the manner of appointment of judicial and technical members of the tribunal(s) and to impart greater efficiency in the working of the tribunal for ensuring maximum disposal of cases it is proposed that in addition to the prerequisite as already mentioned, the qualification of judicial members may also be prescribed under rules made by the prime minister. Furthermore, the constitution and functioning of benches and procedure of the appellate tribunal may be regulated by rules approved by the prime minister.

Dr Hamid Ateeq Sarwar said the objective of this amendment through presidential ordinance is to bring major distributors into tax net.

On Point of Sale (POS), he said that the FBR wanted to install POS software system at 20,000 big retailers’ falling into tier-1 category and so far 4,750 retailers had come into system. The FBR’s Member IT Asim Ahmed said that under newly launched POS campaign they had brought 186 retailers and integrated 5,000 POS points with the FBR system. So far 40 shops started sharing online data with the FBR, he said, and added that they had resolved all major problems because of technical hitches.

On Sales Tax side, the ordinance has explained tier-1 category of retailers. The limit of electricity bill increased from Rs0.6 million to Rs1.2 million on annual basis. The rate of minimum tax decreased from 1.5 to 0.5 percent. The determination of exact turnover tax on retailers will be done through committees constituted with traders. The dispute resolution will also be done by these committees through representation of FBR field formation and trader leaders, the FBR member said.

Section 73 has been amended to provide that a registered manufacturer shall make all taxable supplies to a registered person excluding supplies not exceeding a value of Rs100 million in a financial year and Rs10 million in a month.