Home South Asia Pakistan Cabinet approves money-whitening amnesty scheme

Cabinet approves money-whitening amnesty scheme

PM’s Advisor on Finance Dr. Hafeez Shaikh said people living in Pakistan can declare their assets after paying 4 percent tax while those living abroad can declare their assets after paying 6 percent tax. Shaikh said the purpose of the scheme is not to accumulate wealth but to bring more people in the tax net and the plan is not to intimidate people but to encourage businessmen to participate in the legal economy. The scheme will end on June 30, 2019, and there will be no extension.

tax amnesty scheme
tax amnesty scheme

News Desk |

Prime Minister Imran Khan approved the tax amnesty scheme – which is meant for whitening the ill-gotten money – during a meeting of the federal cabinet on Tuesday.

Prime Minister Imran Khan chaired the cabinet meeting during which the scheme was approved. Later, PM’s Advisor on Finance Dr Hafeez Shaikh briefed the media about the scheme —  Assets Declaration Scheme 2019.

Federal Board of Revenue (FBR) Chairman Syed Shabbar Zaidi, Minister of State for Revenue Hammad Azhar and Special Assistant to the Prime Minister (SAPM) on Information and Broadcasting Dr Firdous Ashiq Awan accompanied Shaikh at the presser.

The government has announced the scheme two days after it reached an agreement with the International Monetary Fund (IMF) about a US$6bn bailout to implement an “ambitious structural reform agenda” over a period of 39 months.

As per the scheme, the advisor said, people living in Pakistan can declare their assets after paying 4 percent tax while those living abroad can declare their assets after paying 6 percent tax. He said the cabinet has decided that the scheme will end on June 30, 2019, and there will be no extension.

Shaikh said that the purpose of the scheme was not to accumulate wealth but to bring more people in the tax net. The philosophy behind the plan is not to “intimidate” people but to encourage businessmen to participate in the legal economy, he said.

Under the scheme, all assets in Pakistan and Abroad can be declared and the only condition to declare assets is to put them in a bank account. Apart from real estate assets, Shaikh said, all other declarations would be subject to four percent tax. He said public office holders and their families cannot benefit from the scheme.

Read more: Reality behind Pakistan’s latest tax amnesty scheme

Meanwhile, Shaikh said that it was last chance for benami assets holders to come forward, adding strict action will be taken once the time for declaring assets is over. On May 13, the newly appointed chairman of the Federal Board of Revenue (FBR) Shabbar Zaidi said the government’s focus was to enhance direct tax net to improve the economy. He said he would try to make changes in the tax collection system, adding that data from non-filers would be collected to include them into the tax net.

The government has announced the scheme two days after it reached an agreement with the International Monetary Fund (IMF) about a US$6bn bailout to implement an “ambitious structural reform agenda” over a period of 39 months.

FBR Modifies Tax Amnesty Scheme

Earlier, Shaikh had raised objections on the tax amnesty scheme and instructed the FBR to make changes in it. In the proposed scheme, the FBR had recommended tax rates for undeclared assets, excluding the domestic real estate and undisclosed income, at 5 percent, 10 percent and 20 percent for the period ending on June 30, September 30 and December 31, 2019.

Under Umar’s model of the tax amnesty scheme, it was reported, the FBR had proposed setting different tax rates for the repatriation of offshore assets, disclosure of domestic assets and legalization of Benami assets.

However, it emerged on Tuesday, a rate of 4 percent will be charged for whitened money and the cash will have to be brought into Pakistan to be kept in banks. For people wanting to keep their money abroad, a rate of 6 percent will be charged.

The FBR’s draft said indicated that the asset declaration scheme would be launched through the promulgation of the presidential ordinance. In the first clear departure from the plans of the former finance minister Asad Umar, Shaikh while raising objections on the classification had disallowed the design of the scheme after assuming the charge.

The adviser had “reviewed the proposed Assets Declaration Scheme 2019 in detail with FBR officials and instructed them to fine-tune the scheme to make it simple to understand and easy to implement,” a handout issued by the finance ministry had read.

Read more: Was Amnesty Scheme Pakistan’s only way out?

In the first meeting with the officials of the FBR, Shaikh has directed them to come up with a more simplified version of the scheme. While focusing on the scope and features of the scheme, Shaikh had told the officials that the purpose of the scheme should be to make economy more tax compliant and documented.

Umar’s Scheme

Under Umar’s model of the tax amnesty scheme, it was reported, the FBR had proposed setting different tax rates for the repatriation of offshore assets, disclosure of domestic assets and legalization of Benami assets.

The report stated that the FBR had suggested a minimum of 5 percent, 10 percent and a maximum 15 percent rate for the repatriation of offshore assets. For the declaration of domestic assets, it added, FBR had proposed 10 percent, 15 percent, and 20 percent rates. For clearance of Benami assets, the proposed rates were 15 percent, 20 percent, and 25 percent.

PML-N’s Tax Amnesty Scheme

The PML-N’s tax amnesty scheme had resulted in the whitening of assets worth Rs2.5 trillion in return for Rs124 billion in taxes. Over 82,000 people had availed the previous tax amnesty scheme.

The 2016 ‘Income Declaration Scheme’ had allowed citizens to report assets previously undeclared to the tax authorities without being prosecuted.

As earlier reported in local media, the FBR had suggested a minimum of five per cent, 10 percent and a maximum 15 percent rate for the repatriation of offshore assets. For the declaration of domestic assets, the report added, it had proposed 10 percent, 15 percent, and 20 percent rates. For clearance of Benami assets, the proposed rates were 15 percent, 20 percent, and 25 percent.

Earlier, the report had said, the idea was to charge the highest rates from those possessing Benami assets, but now it has been decided that tax dodgers would be able to legalese their wealth without much trouble.

Tax Amnesty Schemes in India

According to the Indian media reports, a four-month amnesty for tax evaders in 2016 had resulted in the declaration of hidden assets worth nearly $10bn. The amnesty had attracted 64,275 declarations, with the average amount declared standing at Rs10.2m.

The 2016 ‘Income Declaration Scheme’ had allowed citizens to report assets previously undeclared to the tax authorities without being prosecuted. A charge of 45 per cent was levied on the assets declared under the scheme.

Read more: Will Asad Umar finally spill the beans on sacking, IMF deal?

Earlier, India had introduced ‘Voluntary Disclosure of Income Scheme’ in 1997. In the erstwhile scheme, income or assets worth INR333.39bn were voluntarily declared and an aggregate tax of INR97.6bn was paid to the government.

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