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Not the first and not the last amnesty scheme

April 07, 2018

ISLAMABAD: Shahid Khaqan Abbasi-led government’s tax amnesty scheme is not the first one in Pakistan, as at least six such schemes were offered by different regimes in the last 18 years in hope of inward flight of capital and collection of tax. The proposed amnesty scheme is being widely criticised and opposed by the opposition parties by terming it a pro-capitalist and anti-middle class.

Though there are pros and cons of this scheme which are being highlighted by economic experts, overall the business community is jubilant. The top office-bearers of all the chambers of commerce and industries and financial experts are all praise for the amnesty scheme, saying that the government's move will boost business in Pakistan. They are of the view that it will have far-reaching positive impact on Pakistan's economy.

Major criticism is coming from two main opposition parties including PTI and PPP. Interestingly, PTI chief Imran Khan who is strongly criticising and opposing the amnesty scheme is himself a beneficiary of similar scheme offered in 2000 by military dictator Pervez Musharraf through which he declared his earlier concealed London flat.

It is important to mention that Imran Khan bought the London Flat in 1983-84 through an offshore company Niazi Services Limited. Despite passage of almost 18 years he did not declare this flat to Pakistani authorities until the amnesty scheme was introduced.

Similarly, the PPP leadership has also opposed the amnesty scheme despite the fact that two amnesty schemes were offered by its government from 2008 to 2013 though both came a cropper.

As a result of amnesty scheme offered in 2000 and 2008, reportedly assets worth Rs3.16 billion and Rs10 billion were declared respectively. Although the past barely offers any hope, it is yet to be seen if the amnesty scheme offered by Abbasi-led government yields any fruit.

As part of amnesty scheme offered on last Thursday, significant relief has been offered to the salaried middle class, as the tax exempt amount has been raised from Rs600,000 to Rs1.2 million. Moreover, the amnesty scheme has not been offered to public office-holders and government servants which means that unlawful earnings through corruption will not be entertained.

Another positive move by the government through this scheme is that the non-filers will be unable to purchase property above Rs4 million and CNICs will replace the National Tax Numbers. Economic experts believe that this embargo is a major step towards enhancement of documented economy.

However, financial experts have raised serious questions about the proposed amnesty scheme.

According to these experts, the penalty rates to whiten the money ranging from 2% to 5% are extremely low and should have been at least equal to average plea bargain rate by NAB in last ten years.

Similarly, economic experts question the sudden increase in exemption slab for salaried class of a country whose budget deficit is serviced through loans especially in view of the fact that the source of major direct collection is from this class.

How the foregone tax revenue will be collected can only be known with the passage of time. Likewise, extraordinary relief has been allowed to the high-earning class. Through this scheme, it is being proposed by the government that the FBR rate on property will be abolished and provinces are being requested to abolish the DC rate. It is unclear how the value of property in the absence of any benchmark rate will be determined and by whom.

It appears that the government expects to enforce this with its threat to purchase the property at the price higher than that declared by the individual. Lastly, if the exemption is not available for the money that has been laundered then the audience of this scheme is limited, believe the economic experts.

Moreover, it is also unclear as to how the government will determine whether or not the money being declared under the amnesty scheme was laundered or earned through drug or terror financing, commented the experts.