A Senate panel recently approved a new bill aimed at closing bank accounts of non-filers with balances over Rs1 million and restricting their ability to make certain purchases, like homes or cars, without explaining the source of funds. This bill, called the Tax Laws Amendment Act 2024, was endorsed with some changes to make the law stricter.
What the Bill Proposes
The Tax Laws Amendment Act 2024 introduces the concepts of “eligible” and “ineligible” persons. Even those who file taxes can be considered ineligible if they cannot explain the source of money used to buy assets like cars or homes. Only eligible people will be allowed to make transactions for property, vehicles, or shares, and only up to 130% of the value of their declared assets.
Bank Account Restrictions
The law also proposes that only eligible individuals can operate bank accounts with balances over Rs1 million. Ineligible persons will face restrictions, including being unable to withdraw cash beyond a certain limit. Additionally, the Federal Board of Revenue (FBR) will notify who qualifies as eligible or ineligible.
Property Purchases and Vehicle Restrictions
The bill places limits on who can purchase vehicles or property. Ineligible people will be unable to purchase cars with an engine capacity over 800cc. They may still buy other vehicles, like rickshaws, motorcycles, tractors, and certain trucks.
Justifying the Source of Funds
Finance Minister Muhammad Aurangzeb emphasized that people will need to justify the source of their funds before purchasing any major asset. He pointed out that the FBR has struggled in the past with weak enforcement, leading to ineffective audits of such purchases.
Real Estate Impact
There are concerns that this law might drastically affect the real estate market. Finance Minister Aurangzeb said that during discussions, it was mentioned that the new legal changes could shut down the real estate market.
Suggestions from Senators
Senator Anusha Rahman suggested that the government should also regulate the purchase of gold by ineligible persons. She also recommended that sellers of property should be required to explain the source of funds, similar to buyers.
DHA Restrictions
The bill also targets properties in areas like Defence Housing Authority (DHA), where ownership transfers may not happen immediately. The FBR plans to enforce eligibility checks even if the ownership isn’t transferred, based on the right to live in the property.
Closure of Ineligible Bank Accounts
All bank accounts of ineligible individuals, except for the Asaan account, would need to be closed. These individuals would have to either become eligible filers or convert their existing accounts into Asaan accounts, which have a cap of Rs1 million.
Sharing Data with Banks
The government is also seeking the power to share taxpayer information with commercial banks. This will help banks identify individuals whose banking information doesn’t match the data held by the FBR, making it easier to spot potential ineligible persons.
Potential Impact on the Economy
There are concerns about the impact this bill could have on the broader economy. Restricting ineligible people’s ability to buy assets could reduce property sales and affect the real estate sector. Additionally, restricting people’s access to their bank accounts could disrupt consumer spending.
| Point | Proposal | Impact |
|---|---|---|
| Tax Filing and Eligibility | Only eligible filers can buy property, cars, and shares | Tightens control on who can make large transactions |
| Bank Account Restrictions | Accounts with over Rs1 million closed for ineligible persons | Limits the use of large bank accounts |
| Vehicle Restrictions | Ineligible persons cannot buy cars over 800cc | Limits on certain vehicle purchases |
| Property Restrictions | Restrictions on real estate transactions | Could impact the real estate market |
| Gold and Asset Purchases | Suggestion to regulate gold purchases | Prevents ineligible persons from buying luxury items |
| Data Sharing with Banks | Banks will be notified of mismatched data | Helps identify ineligible persons |
Summary
The Tax Laws Amendment Act 2024 is a significant step toward tightening control over financial transactions and curbing tax evasion. If passed, it will have wide-reaching consequences, especially for the real estate sector and those with large bank balances. The changes will encourage people to be more transparent about the source of their income, making it harder for individuals to bypass tax laws.
