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  • Apr 7th, 2018
  • Comments Off on Amnesty scheme to encourage Pakistanis to disclose assets abroad: experts
Economists and tax experts have termed amnesty scheme for legalization of undisclosed foreign and local assets as a tool for revenue generation, though the scheme bypasses Parliament and ignores provinces on issues of tax relief, real estate sector and immovable property transfers. However, they were unanimous that the amnesty scheme will encourage non-resident Pakistanis to disclose their foreign assets on the proposed rates.

Former Adviser to Finance Ministry Ashfaq Hasan Khan told Business Recorder that tax exemption and imposition is the Parliament's job. The government is talking about sanctity of vote, but bypassing it in taxation matters. If the government was interested to give exemption or reduce tax rates, it should have been introduced through Finance Bill in the budget. Khan said that property is a provincial subject, but provinces were not taken on board prior to announcement of the scheme. This is unfortunate that such scheme in real estates sector cannot be implemented without the support of provinces but they have not been taken on board.

About the implication of the reform scheme, Khan estimated that the raising the tax exemption limit up to Rs 1.2 million for individuals would cause estimated revenue loss of Rs 70 billion. "Who has given the authority to this government to increase expenditure and decrease revenue for the next government?" he asked. He further said that the government was elected for five years and it presented five budgets, there is no moral authority for presenting the sixth budget.

He said all the amnesty schemes of the past failed and the Prime Minister could not present details before the nation, adding the new scheme would meet the same fate. He further said that the scheme is an insult to the genuine taxpayers. When contacted, Former Finance Minister Dr Salman Shah said that the government has tried to address tax system by bringing reforms, boost foreign exchange reserves and improve balance of payment.

He said that there are greater chances of success of the scheme as there is pressure in the whole world on benami and offshore companies declarations and many people may opt for taking advantage from the scheme. He further said if the scheme generates $3-4 billion, it would give a big boost to reserves and may increase them to the level of four months which are at the level of around two-and-a-half months currently.

The reduction in tax rates for individuals may help in increasing tax compliance. However, he said that there is criticism that people who evaded taxation would get advantage from the package, Dr Salman Shah added. Reacting to the Prime Minister's claim that proposed Economic Reforms Package is different because it does not mean revenue generation only, a leading chartered accountant said that it is a major revenue generation measure.

Tax experts were of the view that the government has proposed a very low rate of tax on legalization of foreign assets to be declared and held outside Pakistan. Five percent tax has been proposed on such assets. The tax rate for the legalization of such assets which would not be repatriated to Pakistan should be much higher. Another chartered accountant said if undisclosed assets have been legalized aboard without bringing them into the country, the tax rate for such whitening of assets should be very high like 10-15 percent.

They questioned the ability of the Federal Board of Revenue (FBR) for securitizing foreign remittances. Under the scheme, all those remittances less than $100,000 a year will continue without any question from any agency about the sources and all remittances greater than $100,000 a year will enjoy tax exemption but only FBR may question the source. When the FBR failed to take any action against the owners of offshore companies in Panama case, how tax machinery would be able to scrutinize remittances over $100,000 a year, the tax experts said.

A senior lawyer Azhar Siddique stated that as far as reduction in tax rates is concerned under the Economic Reforms Package, it is his opinion that it will help in strengthening broad based taxation system in Pakistan. The amnesty scheme will be instrumental in bringing foreign assets into the country, he added.

Tax lawyer Waheed Shahzad Butt while strongly criticizing the amnesty scheme said that the introduction of any amnesty scheme for tax evaders is nothing but height of immorality fully sponsored by the state. The government instead of entertaining any such scheme should seriously consider introducing 'assets-seizure scheme' to confiscate undeclared/untaxed assets/wealth created from black/undisclosed/untaxed money and make laws to bring back looted money from tax cheaters. There cannot be two opinions that tax amnesty and black money whitening schemes constitute acts of betrayal, cheating the honest and loyal taxpayers and deceiving the exchequer technically. This may be classified as SRO mafia bypassing the fiscal law enacted by the Parliament.

Instead of dealing with these issues with an iron hand, the government has been pardoning the corrupt and appeasing tax evaders through various amnesty schemes. This is the time for the government to decide that it should not allow such amnesty schemes which are against legal ethics and good governance. The government should find out how this black money was generated in the first place. Anyone can easily find out unaccounted money by just looking at the markets, educational institutions, private hospitals, hotels and businesses etc. The government should remove all subsidies/exemptions which could be potentially allowing generating black money as well, he said. He said that announcing amnesty schemes time and again is nothing but showing helplessness of FBR in tackling black money.

Copyright Business Recorder, 2018


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