Pakistan announces tax amnesty to strengthen economy

KARACHI: Pakistan’s Prime Minister Shahid Khaqan Abbasi on Thursday announced a much-anticipated tax amnesty scheme, clearing the way for the declaration of unreported offshore and locally held assets.
The purpose of the government’s decision to introduce the incentive package is to boost the country’s declining foreign exchange reserves and increase the number of income taxpayers, which currently stands at 1.2 million.
The measures announced by the prime minister included increasing the income tax threshold from Rs 400,000 to Rs 1.2 million per year. “Those who earn Rs 1.2 million to Rs 2.4 million will have to pay 5 percent income tax and those earning between Rs 2.4 million and Rs 4.8 million will be liable to pay 10 percent income tax,” Abbasi announced.
The government will charge 15 percent income tax on those earning more than Rs 4.8 million per year.
The prime minister also announced that the Computerized National Identity Card numbers would be made into National Tax Numbers to monitor the tax transactions of all citizens.
The scheme also allows the declaration of assets parked locally or internationally that have been kept unreported for tax evasion purposes. “People with undeclared incomes earned before June 30, 2017, on assets within the country will be able to bring them in the tax net by paying a 5 percent penalty, while those holding assets abroad will be able to declare them by paying a 2 percent penalty,” said the prime minister.
He also announced that fixed assets could be declared with a 3 percent penalty, adding that the assets would be evaluated at market rate. Foreign liquid assets like cash, securities and bonds held abroad and in local dollar accounts could be declared with a 5 percent penalty, he continued.
Abbasi said that dollar account-holders in Pakistan who purchased the American currency with undeclared funds could also regularize them by paying 2 percent. He noted that the government had also taken measures to allow only tax filers to open foreign currency accounts.
Regarding property reforms, Abbasi announced that citizens would be required to pay a 1 percent presumptive tax on the purchase of any property. He also announced the abolishment of the Federal Board of Revenue tax rate on property from July 1. “Non-filers will not be able to purchase property worth over Rs 4 million from next fiscal year,” he warned.
The amnesty is scheduled to last until June 30.
Reactions
Members of Pakistan’s business community, tax experts and economists termed the scheme a prudent step in the context of the current financial condition of the country.
“We had demanded the implementation of the scheme across the board, but they have excluded politicians. I request all parties not to resist this scheme because it will bring money back into our country,” Federation of Pakistan Chambers of Commerce and Industry President Ghazanfar Bilour told Arab News.
He added that the government should make sure no questions are asked of people who declare their wealth. “No government agency, including the FBR or FIA (Federal Investigation Agency) should be allowed to ask them anything after a passage of time,” he said.
President of Karachi Chamber of Commerce and Industry Muffasar Ata Malik said the government’s move was good for the salaried classes, but described it as a bitter pill for honest taxpayers. “It is a move that gives incentive to those who are involved in tax theft or those who have stashed their assets abroad,” he said, adding: “Despite its downside, however, the scheme is good.”
Former president of the Income Tax Bar Association Abdul Qadir Memon observed that the penalties on the declaration of assets were nominal and could yield the desired results. “Pakistan is not alone,” he said while defending the government’s move. “Many other countries have announced such schemes to bring back offshore assets.”
Senior economist Muzamil Aslam said: “It is a timely move that should produce positive results since it is increasingly becoming difficult to hide such assets abroad.”
Chairman of the Association of Builders and Developers of Pakistan Arif Yousuf Jeewa sounded happy while talking to Arab News. “The government has accepted our proposal of property valuation at market rate, for which we had been clamoring for nearly four years,” he said while calling for the continuation of the scheme.