Comment: Taxes on remittances, stock millionaires must for revenue generation

LAHORE: Economists wonder as to why the ordinance providing complete immunity to foreign remittances has not been repealed, why the income on property is not properly taxed, and why stock market billionaires are under taxed.

These are the avenues used by businesses, smugglers and terrorists to park ill-gotten money. The Institute of Chartered Accountants of Pakistan has since long been recommending the government to make the foreign remittance immunity rational, but no progress has been made in this regard.

If a son residing abroad sends money to his parents that should be exempt from tax up to a limit. If further relaxation is needed then remittance to a blood relation can be exempted from scrutiny.

A Pakistani residing abroad may even be allowed to remit up to $1,000 to a poor person or distant relative. However, if a person residing in Pakistan receives over $1,000 from a person who has no relation with him, the amount received should be subjected to some tax.

It could be two percent for $2,000-10,000 and three percent for remittance of $10,001 to $20,000 and so on. Moreover, the sources that send the amount should also be subjected to scrutiny.

One argument in keeping the no question asked immunity is that this will shift remittances from official to unofficial channels. This is a very weak argument as strictest action should be taken against hundi dealers who challenge the writ of the government.

Eliminating illegal transfer of resources is in supreme national interest. All terror financing is done mainly through this avenue.

We cannot mortgage the safety of our country by allowing hundi operators to launder money. There should be a strict and comprehensive law against illegal transfer of money.

If we look at numerous businesses it would be found that the money generated by them in last 25 years is not in line with the income they declared in these years. However, many declarations pertaining to remittances received from abroad would be there in their statements submitted with the tax collectors.

No one knows who sends them the money and for what purpose.

The Federal Board of Revenue (FBR) dare not ask this question because they are protected by the constitutional amendment granting immunity from revealing the source.

This blank immunity has not stopped the outflow of ill-gotten money from Pakistan. While businessmen take the precaution by first sending money abroad and then bringing it back through remittances by incurring the nominal cost of these transactions, most of the politician did not even do this.

They stashed money abroad and did not bring it back through remittances to make it legal.

Terrorists and illegal mafias, smugglers and anti-state elements also use this flaw in the law to bring or send out money through hundi.

Pakistan’s economy is now at a juncture where such flawed laws are a big blow to the efforts of the state to generate revenues for development. In fact, we are reaching a stage where funding for non development general expenses is difficult to come by. As far as stock market is concerned, the number of billionaires it has created in the last 25 years needs to be reviewed.

The income generated from the trading activities in a fiscal year should be taxed in the same way as the income generated by other businesses. All incomes should be equally taxed including agriculture.

Is it not strange that those big names that declare agricultural income every year did not reduce their income even in years when the agricultural growth was very low or in negative?

As far as the real estate is concerned it should be noted that the rates of property more than double every 5-10 years. When the going is good, the property prices in some localities double in a year or two.

The tax should be collected on the increase in value obtained at the time of sales on fairly fixed official rates. This burden should be on the seller and not the buyer.