FBR for 3-5pc tax to bring offshore assets to Pakistan

ISLAMABAD: The Federal Board of Revenue (FBR) has prepared a draft of amnesty scheme titled the ‘Foreign Assets Declaration Scheme’ (FADS) and handed over to Prime Minister Shahid Khaqan Abbasi, proposing tax rates of 3 to 5 percent for bringing back offshore assets into Pakistan exactly on the pattern of the Indonesian model.

Tax authorities have also prepared another comprehensive plan for payment of all pending tax refunds worth billions of rupees before expiry of tenure of the incumbent PML-N led regime as all those stuck up amounts with the FBR will be cleared where the Refund Payment Orders (RPOs) were issued.

Top officials in the PM Secretariat confirmed to The News on Wednesday the draft of FADS was now in possession of Prime Minister Shahid Khaqan Abbasi in which theFBR proposed adoption of Indonesian model by fixing lower taxation rates in the range of 3 to 5 percent for regularising of assets but the beneficiaries of this upcoming scheme would have to declare the worth of assets in any foreign currency and then equivalent amount in rupees would be paid for tax payment purposes. “If this proposed scheme ensures confidentiality of those availing this scheme and also grants protections from NAB and Anti-Money Laundering (AML) laws, Pakistan can get $2 to $4 billion on immediate basis,” official sources confirmed to The News here on Wednesday. By offering lower rates for its amnesty, Indonesia had attracted $30-$40 billion back into its economy.

In the aftermath of surfacing of the PanamaLeaks, different countries had unveiled amnesty schemes for regularising foreign assets of their nationals. Pakistan decided to adopt the Indonesian model under which the tax rate was proposed at 3 to 5 percent for declaring their assets.

The government rejected the proposal to offer this upcoming amnesty for onshore assets, so only owners of offshore companies and assets will be able to avail this scheme. The government has not yet decided how it will be implemented. There are two options; one is getting approval from parliament which seems impossible because the ruling party does not enjoy majority to pass it from parliament. The second option is promulgation of an ordinance and then pass it from parliament by making it part of the money bill in the next budget.

Prime Minister Shahid Khaqan Abbasi is set to take up FADS probably on coming Monday or he will chair the meeting after his return from Davos after attending the World Economic Forum (WEF).

When contacted, Chairman Tax Reforms Commission Masood Naqvi told The News on Wednesday that there were 11 countries including Germany, US, Canada, Indonesia and even India had given amnesty scheme for bringing back their foreign assets into their countries so the stage was ripe to go ahead with this scheme by evolving a consensus. He said that India had slapped higher tax rate in the range of 35 percent and could not bring back more than $10 billion.

“If confidentiality of beneficiaries of this scheme is ensured and grants protections from some laws, Pakistan could bring back $5 to $10 billion,” he made a projection and added that deliberations with the FBR were expected today (Thursday) and then final meeting would be held with prime minister anytime afterwards to finalise this proposed scheme.

 Dr Ishrat Hussain, former governor State Bank of Pakistan, said that Pakistan should introduce one time amnesty just on the pattern of Indonesia as they were able to bring back $30-$40 billion into their country.