Checks on forex accounts to prevent $5.5bn mis-declaration

KARACHI: Recent restriction imposed on foreign currency accounts will help prevent around $5.5 billion mis-declaration at import stage, a member of the Economic Reform Committee (ERC) said on Tuesday.

The six-member ERC was constituted by Finance Minister Dr Miftah Ismail on the directives of Prime Minister Shahid Khaqan Abbasi on May 4 to make recommendations for the improvement of the economy.

The first meeting of the committee is scheduled to be held on Wednesday (today).

The ERC member said the government intended to make Pakistan a manufacturing state by discouraging imports.

The aim was eight percent GDP growth through enhanced activities in industrial and agriculture sectors, which were imperative for employment generation.

The member claimed that mainly commercial importers misused the free movement of money through foreign current accounts.

The change in tax regime for commercial importers would allow the government to audit their book of accounts and the Federal Board of Revenue (FBR) would also be able to check their sales tax declaration with their declaration of incomes.

It is worth noting that the trade data of Pakistan with China, Dubai and the UK reveals $3 billion, $1.5 billion and $1 billion mismatch, respectively.

The member said the government would not bow down to the demand of

business associations for restoring Final Tax Regime (FTR) for commercial importers.

The ERC member said there were about 600,000 foreign currency accounts and out of those only 25,000 were return filers. “The under-invoiced money (is) fed through these unchecked foreign currency accounts,” the member added.

To curb such activities, the government, through a presidential ordinance, has made it mandatory that only an income tax filer deposits money into a foreign currency account.

For tackling these problems, the government has taken another major initiative in the 2018/2019 budget, under which Final Tax Regime had been abolished and minimum tax regime was introduced.

This change would provide sufficient record to tax authorities regarding import value and sale price by the commercial importers, the ERC member said.

In the meeting, the overall economic reform package announced by the prime minister would be discussed, the member said, and added that the participants would also discuss the amnesty schemes for both illicit local and foreign assets.

The discussions would focus on changes brought into Protection of Economic Reform Act and Section 111(4) of Income Tax Ordinance, 2001 to prevent money laundering.

The economic agenda of the government has far reaching impact and it would take Pakistan in the rapid growing nations in next 20-25 years.