ISLAMABAD (April 15 2006): The Central Board of Revenue (CBR) has proposed amendments to the Protection of Economic Reforms Act, 1992, to settle 11 cases pertaining to smuggling of foreign currency, pending before the Supreme Court of Pakistan, involving an amount of $330,000.
Sources told Business Recorder on Friday that the parties are taking advantage of section 4 (freedom to bring, hold, sell and take out foreign currency) of the Protection of Economic Reforms Act, 1992.
In this regard, the CBR is consulting Ministry of Finance, State Bank of Pakistan (SBP), Attorney General of Pakistan and Law and Justice Division for legal opinion to deal with the issue.
According to details, customs officials at the airports had registered 11 cases of smuggling of foreign currency on charges of misdeclaration and smuggling against the out-going passengers in 2001.
The foreign currency was confiscated when the declarations made by the passengers were found to be incorrect, when the conversion was sought by moneychangers. Foreign currency of over $30,000 is involved in each case, taking the total to $330 000.
The CBR had lost departmental appeals in High Court and now the cases are pending before the Supreme Court.
Sources said the parties have referred to the provisions of the Act to take out foreign currency from Pakistan. Although the relevant section of the Act was amended on four occasions, the 'protection' on taking out currency from Pakistan was not withdrawn.
The provisions of the Act override section 2(s), 156(1)(b), 165 and other relevant provisions of the Customs Act, 1969. This enabled the parties to get favourable decision against the customs authorities.
According to CBR, the relevant clauses of the Act provide protection to investment, privatisation of public sector enterprises, fiscal incentives for industrialisation and deregulation of investment and other investment related activities. The Act overrides other laws, but it does not provide protection to any amount of foreign currency being smuggled out of the country by submitting wrong statement. Despite this legal status, the CBR has lost cases in the High Court.
Besides, the State Bank notification of 1998 allows taking out foreign currency up to $10,000, or equivalent amount in other currencies, for which no question would be asked, CBR said.
Following the protection to foreign currency, the CBR is unable to win the cases pertaining to smuggling of currency under the Customs Act, 1969. Moreover, the customs authorities were unable to levy penalty or give punishment to the persons involved in such cases due to overriding provisions of the Reforms Act.
Sources said that CBR is convening meetings with the line members and relevant ministries to deal with the situation in the Supreme Court. For this purpose, the CBR wanted some policy decision on the issue so that the department should get legal protection at the highest level of judicial fora. When contacted, a tax expert said that the CBR wanted to win these cases due to involvement of huge amount of smuggled foreign currency. Secondly, the CBR is facing difficulty in winning these cases due to the protection given to the investors under the Reforms Act, he said.