PM announces one-time amnesty scheme on offshore assets
January 18, 2018
January 18, 2018
ISLAMABAD: Prime Minister Shahid Khaqan Abbasi announced on Wednesday that a one-time tax amnesty scheme on offshore assets will be offered to Pakistanis, while also saying that tax rates on personal income will be lowered amid his disapproval of the Federal Board of Revenue’s (FBR) performance.
The premier’s dissatisfaction was not only limited to the tax machinery, as Abbasi also refrained from talking confidently about overall economic performance. However, the premier was more than upbeat as he discussed the government’s performance on issues of tackling the law and order situation and the energy crisis.
The premier was addressing the Pakistan Economic Forum, organised by the Pakistan Business Council (PBC) – an advocacy body of the largest conglomerates of the country. The PBC pushed forward a tax reforms agenda, which was originally conceived by the Tax Reforms Commission.
Tax amnesty: Law on the anvil to protect owners of offshore assets
“We will give a one-time tax amnesty scheme,” announced the PM in his address without disclosing the time frame to implement the scheme. He said that at the initial stage, the FBR would not ask any questions from the citizens.
The PBC has been pushing the demand for the amnesty scheme due to a tightening noose around tax evaders by the Organization for Economic Cooperation and Development. The global campaign against tax evasion will make it difficult to retain untaxed and hidden money abroad for a longer period.
Many businesses have withheld their money that they now want to bring back and a facility on return of assets should be offered to them, said Dr Ishrat Husain, the former State Bank of Pakistan governor while proposing measures on behalf of the PBC. This will be the fourth tax amnesty scheme during the current PML-N’s tenure. This time, it aims at saving the skin of billionaire politicians and business executives, who are facing problems due to tightening global fiscal laws.
According to AF Ferguson’s assessment, Pakistanis have parked about $150 billion worth of assets abroad. Of the total, $40 billion are parked in foreign real estate either through offshore entities or directly. Another $40 billion are deposited in foreign banks; $20 billion are in the shape of shares in Pakistani companies and $50 billion are in the shape of other assets, including manufacturing concerns.
But its assessment is that at best ‘$3 billion to $4.5 billion’ will be repatriated to Pakistan. The rest of the people just want a certificate from the government at abysmally low cost.
The PM said that the government will also lower tax rates for individuals. He said that the FBR collected less than Rs200 billion as individual income taxes and by lowering these rates, the collection can be improved.
The premier was very critical of the FBR’s performance and also disapproved its policy of lowering the property valuation rates for federal tax purposes.
“It is a very dismal situation that there are only 1.2 million income tax return filers and one-third of them file nil returns,” said PM Abbasi. He said that all the money from tax evasion goes into the real estate sector and the only solution to this problem is that the property valuation rates should be at actual market rates. “Otherwise, tax evasion will continue,” he said.
NA clears tax amnesty for realty sector
However, contrary to the PM’s policy, the FBR last week lowered property valuation rates for certain localities of six major cities. It has also deferred implementation of the second phase of increase in valuation rates.
The PM said that to improve the tax situation, the government will offer a lot of caveats with one stick that will not be of the FBR’s. He said this time the stick will be technology that will be used to broaden the tax net.
Meanwhile, the PM said the energy crisis has more or less been resolved and a roadmap has been given for the next 12 years. If we implement this roadmap, the country will not have energy problems again, said the PM.
“Economy is a source of debate in the media and the Pakistan Business Council … macro issues are before you”, said PM Abbasi while discussing the economy.
He said that exports were still at $20 billion, terming recent growth in exports as “marginal and not sufficient” to meet the country’s needs. The PM said that Pakistan has to increase its exports to a minimum $50 billion.
The tax policy has contributed to premature deindustrialisation, which has led to recurrent pressure on foreign currency reserves, said Shabar Zaidi, senior partner of AF Ferguson. He argued that effectively, 74% tax collection by the FBR was indirect in nature. The tax structure also discouraged the manufacturing and promoted trading, he added.
Published in The Express Tribune