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June 13, 2018

Tax amnesty scheme to bring back heavy foreign assets, stashed money


June 13, 2018

ISLAMABAD: Following the consent of the Supreme Court for the tax amnesty scheme announced by the former PML-N government in April this year, there are strong chances that this can turn into the biggest ever amnesty scheme resulting in repatriation of large number assets of Pakistanis held abroad.

Though the amnesty scheme announced by the previous government offered big relaxations to the businessmen and citizens holding undeclared money or assets abroad, no one availed this opportunity in the beginning as the same was taken up by the apex court for judicial review. Reportedly, during first 8 weeks, only few hundred citizens submitted their annual returns and taking benefit of the amnesty scheme contributing some Rs350 million to the national kitty.

According to the FBR officials, this initial failure of the amnesty scheme was because of fears of the businessmen and citizens who wanted to benefit from it that the SC may declare this scheme void.

However, following the apex court nod, now there is hurdle or ambiguity and it is expected that large number of citizens will benefit from it and will disclose their assets held abroad as well as in Pakistan to legalise them by paying nominal taxes. The remaining days of the month of June are extremely important as next government may have a different approach towards this scheme. However, those who will avail this opportunity will not be affected by any policy of the new government.

Former chairman FBR and ex-secretary Revenue Dr Muhammad Irshad told The News few days back that those who avail a lawful amnesty scheme could not be questioned if such a scheme was undone later.

At the maximum, he had said, the scheme could be discontinued by undoing the law but such an act would not have retrospective effect. Therefore, those who have already availed the amnesty scheme could not be questioned.

The amnesty scheme announced by the previous government was greatly based on the recommendations given by a high-level official committee headed by the Governor State Bank of Pakistan (SBP) and comprising experts from SECP, NAB, IB, FIA and Ministry of Finance. This high level committee was worked for tracing and bringing back Pakistanis’ wealth held abroad. The committee in its report has concluded that the present environment is “most conducive for a voluntary disclosure scheme to Pakistani citizens to declare and repatriate their assets held abroad”.

The committee had also recommended that the existing and prospective measures to trace foreign assets of Pakistani citizens like OECD (Organisation for Economic Co-operation and Development) multilateral conventions should be widely publicised to convince citizens that if foreign assets are not declared through this one-time window opportunity, there is high probability that those assets will be traced exposing such persons to huge penalties and prosecution.

In the formulation of the report, the committee had consulted different stakeholders including Syed Shabbar Zaidi from AF Ferguson and Co, Bashir Ali Muhammad of Gul Ahmed Textiles Mills Ltd, Mehmood Mandviwalla and Ali Zafar from Mandviwalla and Zafar, Syed Mazhar Ali Nasir from FPCCI, Siraj Kassan Teli and Abdul Basit from Karachi Chamber of Commerce and Industry, Malik Tahir Javaid from Lahore Chamber of Commerce and Industry, Arif Habib of Arif Habib Group, Asim Zulfiqar and Rashid Ibrahim from AF Ferguson & Co, Masoodul Hassan Naqvi and Ashfaq Tola from Tax Reforms Commission.

In the previous amnesty schemes an amount of Rs1.12 billion was recovered from undeclared assets during 1958 amnesty scheme, Rs920m in 1968 amnesty scheme, Rs1.5b in 1976, around Rs10b in 2000-01 and Rs3.16b in 2008. PTI Chief Imran Khan was the beneficiary of 2000-01 tax amnesty scheme when he declared his London flat some 18 years after its purchase in 1983. However, later Imran turned against the amnesty schemes without disclosing the fact that he himself had availed amnesty scheme. Amnesty schemes are considered as an effective tool to convince citizens to bring back their assets held abroad.

In the recent years as many as 50 jurisdictions including developed as well as developing countries like US, Germany, Indonesia, India, Brazil etc have incentivised their taxpayers to disclose and repatriate foreign assets by introducing voluntary disclosure schemes which offer lower tax rates and waiver of penalties in respect of disclosure and repatriation of foreign assets. The rate of tax/penalty, however, has varied from as low as 1 percent to as high as more than 50 percent.

Contrary to the prevalent perception, tax amnesty scheme is not helpful for public office holders as they are not entitled to take benefit from it. No one who has made assets through corruption, drugs or narcotics business, crimes or misuse of authority can benefit from this scheme.

The scheme is mainly designed to bring the tax evaders back into the tax net by declaring their domestic or foreign immoveable and moveable assets.

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