Tax department initiates investigation against non-profit organisations

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  • As many as 876 companies are registered with Security and Exchange Commission of Pakistan as NPOs

ISLAMABAD: The tax department has initiated an investigation against the non-profit organisations (NPOs) with regard to tax evasions, it was learnt on Saturday.

Senior tax officials told Pakistan Today that the department has sent notices to a number of NPOs, including medical colleges, and has also requested the concerned department to end the NPO-status to a number of organisations.

NPOs working in Pakistan are getting tax exemption with reference to their defined activities. Presently, a total of 876 companies are registered with the Security and Exchange Commission of Pakistan (SECP) as NPOs.

Companies Act, 2017, bounds the NPOs to utilise their money, property, donations or income or any part thereof solely to promote their objectives. The companies are strictly prohibited to distribute dividends. In addition, the objects and activities of such companies shall not be against the laws, public order, security, sovereignty, and national interests of Pakistan.

The SECP has also issued a regulatory framework in order to ensure transparency of NPOs funding mechanism and to mitigate money laundering and terrorist financing risks.

Official sources informed this scribe that some medical colleges are registered as NPOs in Islamabad despite the fact that they are earning millions of rupees through their organisations. Similarly, they added, two Lahore-based organisations, working on poverty alleviation and other business, are not only engaged in business activities but are also distributing dividends to their members.

“They are not the only ones violating the rules, as the concerned department is also keeping a mum on this matter,” sources said.

The officials said that a number of testing bodies are also registered as NPOs despite earning millions of rupees by conducting tests.

Earlier, the tax department had issued Rs7 billion notice to a country’s prominent testing service and now the matter is in court, officials added.

It is pertinent to mention that a senator in 2017 inquired as to how many of the existing testing bodies have paid their taxes in three years. The then finance minister replied that Nation Testing Service (NTS), Balochistan Testing Service (BTS), Sindh Testing Service (STS) and Pakistan Testing Service (PTS) have not paid a single penny in taxes for 2014, 2015 and 2016.

Sources said that companies are required to have their licenses renewed after a period of three years, adding that company licenses can be revoked if they fail to comply with the licensing conditions specified by the SECP.

SECP spokesman Sajid Gondal told this scribe that the department has revoked the licenses of 288 NPOs without giving the names, however, the department has also renewed the licenses of 203 such companies so far.

The spokesman further informed that a detailed mechanism to verify compliance with the licensing conditions, undertake offsite examination of statutory returns and annual audited accounts as well as onsite inspection of such companies exists, which is diligently applied.

“SECP has completed onsite risk-based inspections of 42 companies and this exercise would ensure that only operationally active and statutorily compliant companies are allowed to work under the regulatory purview of SECP,” Sajid Gondal added.