Foundations' Real Estate businesses come under Radar

Cabinet tasks Law Minister to compile a report regarding misuse of tax exemptions

Aftab Ahmed

Islamabad: The government has initiated a probe to check the misuse by the charitable organizations including army welfare Trust, availing tax exemptions, and have invested in commercial businesses of the real estate in Pakistan.

Real estate becomes a lucrative business in Pakistan. The government has allowed tax exemptions to charitable organizations including welfare foundations of forces but they have invested in commercial activities including real estate business in Pakistan.

Cabinet members have raised questions over the commercial activities especially the real estate business in Pakistan. They have named Shaheen Foundation, Army Welfare Trust, Fauji Foundation, and Police Foundation.

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These welfare trusts are enjoying tax exemption for charity work for their organizations. But cabinet members have pointed out that they had invested in commercial activities including the real estate business in Pakistan.

During a discussion in a meeting of the cabinet, the members had expressed apprehensions that some entities registered under the Charitable Endowment Act, use the welfare facade to cloak commercial activities, especially real estate development, to enjoy tax exemptions.

Cabinet members have quoted examples included Shaheen Foundation, Army Welfare Trust, Fauji Foundation, Police Foundation, etc.

Minister for Law and Justice pointed out that as per the prevailing international legal understanding, some commercial activity by charitable/welfare organizations was acceptable, but to qualify as such, the entity must pass “the “dominant purpose” test” as a philanthropic/welfare organization.

Elaborating on the laws governing the charitable/welfare organizations, a member pointed out that there were different federal and provincial legislation, which were applicable, such as, the Charitable Endowment Act, the Societies Registration Act, the Trust Act, etc.

He underscored the need to harmonize all these Acts to check the subterfuge. The Cabinet tasked the Minister for Law and Justice to propose amendments in the relevant laws to check misuse by the charitable organizations of their status.

It considered the summary titled ‘Establishment of Pakistan Coast Guards Foundation’ Interior Ministry had submitted and directed Minister for Law and Justice to propose necessary amendments in the relevant laws to check the misuse by the charitable/welfare organizations of their status to carry out commercial activities, especially real estate development, to enjoy tax exemptions.

The Cabinet further directed to resubmit the instant summary regarding the establishment of the Coastal Guards Foundation in light of the report of the Minister for Law and Justice.