ISLAMABAD- To control money laundering and illegal money transfers, StateBank of Pakistan has proposed amendments to limit tax-free foreignremittances to Rs 10 million per annum.

SBP says that current laws make it easy to hide or launder illegally earnedmoney in Pakistan.

The Central Bank also proposed to disclose details on foreign currencyaccounts held by Pakistanis that have billions of dollars in foreignexchnage.

SBP has submitted a draft to Senate Standing Committee on Finance where itproposed several amendments and repealing of laws. The committee told SBPto bring the proposal of amendments for the upcoming budget.

The Bank specifically asked to amend two laws to make the accountingprocess more transparent.

One of these laws is the Protection of Economic Reforms (PERA) 1992. SBPsays that this law is being misused and it practically makes the inflow ofillegal foreign currency easier.

SBP told that foreign currency account holders should declare their assets.The bank suggested that these account holders should be stopped fromputting foreign currency in these accounts by buying it from the openmarket.

The amendment in section 4 of PERA act will make it mandatory to declareforeign currency assets. Two more amendments in section 5 of the same actwill prevent foreign currency from being transferred into these accountsand its unchecked withdrawal.

The Bank asked that the source of foreign remittances sent to Pakistan mustbe asked and and remittances exceeding Rs 10 million should be taxed.

The draft further sought amendments in Income Tax Ordinance 2001 andrevocation of the Foreign Currency Accounts Ordinance 2001. The bank saysthat by misusing these laws, illegal money is sent out of the country andit is then sent back in through banking channels making it “clean money”.The current laws do not ask about the source of the money that is beingsent into the country.

SBP says that Foreign Currency Accounts Ordinance 2001 provides protectionto the foreign currency accounts and that is why they go unchecked.

Section 111-4 (a) of the Income Tax Ordinance of 2001 is used for thiswhole process and it should be amended to make the process moreaccountable, SBP added.