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April 23, 2019

Bad amnesties


April 23, 2019

With Asad Umar no longer finance minister, the government is examining what to do about the controversial amnesty scheme that had been proposed recently. New Finance Advisor Hafeez Shaikh’s decision to hold a meeting to discuss the amnesty scheme suggests that the government remains committed to yet another misadventure. It was only one day before Umar’s dismissal that his proposed amnesty scheme hit a snag in the cabinet. The make-up of the cabinet has been changed drastically since then, which might mean that the new cabinet is more amenable to the amnesty proposal. It is clear that the PTI does not trust its own elected representatives to toe the line its leadership wants. Will Shaikh be able to revise the amnesty scheme proposal in a way that will make it amenable to the public – and prevent the PTI from losing face? Shaikh is said to have directed officials to revise the amnesty scheme to ‘broaden the tax net’, instead of generating short-term revenue. The words are right, but one will have to see the results to tell whether that is indeed the impact.

The PTI would be wise to drop the idea of a tax amnesty scheme at a time when its economic governance is being questioned. Choosing to go for an amnesty scheme betrays all the principles that the party claimed it would uphold. Who can forget that the party came to power with a promise to clampdown on tax evasion, money laundering and corruption? Instead, the amnesty scheme gives the impression that it is willing to give a clean chit to some of the worst offenders. Targeted at businesses, the proposed amnesty scheme is willing to allow businessmen to readjust their balance sheets to bring their real assets and income on the books. But why should such businesses which have hidden income and assets not be punished instead? That was the promise that the PTI came into power through. It would appear that it has been let go before the government even tried to fulfil it. Should the focus not be reform in the FBR, instead of proposing new amnesty schemes? The government should have focused on improving Pakistan’s tax infrastructure. Instead, it will rely on using the amnesty scheme as a desperate way to generate more revenue to show the IMF. A tax-amnesty scheme is a poor way of both expanding the tax base and generating revenue. It makes the government appear weak and unable to crackdown on serious tax evasion. The government may wish to reconsider it.

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