During last meeting of the TRIC, a comprehensive presentation on behalf of the sub-committee, constituted earlier, was given by Member TRIC Abid Shaban on the preconditions for launching of a voluntary disclosure initiative by taxation authorities for overseas assets and the attributes thereof which would culminate in the source of such a scheme. The committee was apprised regarding the chronology of the previous amnesty schemes offered in Pakistan scale of the local shadow economy in Pakistan as evidenced by the unprecedented increase in prize bond stock and estimates of assets held overseas by Pakistan. Abid Shaban also shed light upon amnesty schemes offered by various countries recently for undeclared overseas assets and dilated upon the essential features of a potential voluntary tax declaration scheme for overseas assets in the case of Pakistan. It was also pointed out that the tax law requires amendment with respect to the definition of a resident person and ensuring taxation in the year of discovery. It was suggested that having an NTN be made mandatory for operating a foreign currency account. The potential scheme should be coupled with change in laws to close the channels of outflow of funds and creation of overseas assets.
The possible options as regards the modalities of a voluntary tax declaration scheme for offshore assets were also deliberated upon at length by the committee. As regards inclusion of local assets in such a voluntary tax scheme it was opined that the caveats of the proposed scheme could apply to local assets as well. It was opined by the members of the TRIC that an increase in the period of limitation for the reopening of assessments would only legally apply prospectively and that presently multilateral exchange of information treaties have not been executed with various jurisdictions which are tax havens.
Member Tax Reform Commission Ashfaq Tola opined that the department currently lacks the capacity to effectively tax foreign assets and unearth evasion techniques such as layering, inversion, etc. Tax Reform Commission Chairman Masoud Naqvi highlighted various reasons as to why a voluntary overseas assets tax declaration scheme should be considered. He was also open to similar scheme for local assets so that the nation makes a new beginning.
The FBR Member Taxpayer Audit (TPA) expressed reservations with regard to the concept of amnesty schemes, stressed that the same create distortions and asserted that the focus should instead, be shifted towards effective enforcement measures and proper utilisation of information received from other countries. However TRIC members were of the view that in the backdrop of the OECD multilateral regime on exchange of information, changed environment overseas and the stringency being adopted by various countries with regard to movement of foreign funds/assets, the limited present capacity of FBR, it is an opportune time for reaping the economic benefits of a scheme for overseas assets in light of the experience of various other countries and making a new beginning.
It has been decided that the first draft of the proposed voluntary tax declaration scheme for overseas assets to be formulated by private members of the TRC. Similar voluntary tax declarations scheme for local assets should also be developed either as separate scheme or consolidated with overseas asset voluntary tax declaration scheme.
A sub-committee was constituted to examine and critically appraise the first discussion draft of the voluntary scheme for assets held overseas and locally. The FBR Member (IR Operations) was nominated as the convenor of the sub-committee and it was decided that the members would comprise private members of the TRIC, FBR Member (IR Policy), the FBR Chief (Income Tax Policy) and FBR Chief (Operations).
Copyright Business Recorder, 2017