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The Tax Amnesty Schemes proposed by the Federal Board of Revenue could be different from earlier amnesty schemes if instead of focusing on the quantum of revenue collection, the emphasis is on correcting the system of revenue collection.
All talk of international acceptability; or lack thereof, could be rubbished if the scheme can be sold as a voluntary, time-bound concession to be followed with a big stick backed by political forces.
The real intention has to be to get the people into the fold; to start filing returns and move away from the presumptive tax regime in favour of the withholding/advance tax collection system.
The Prime Minister needs to personally oversee the quick passing and implementation of the said proposals with the help of the coalition partners. On this front, it appears the support is not far.
"These proposals are not simply another chance for tax evaders to come clean, they include effective sticks along with the carrot of tax amnesty", Senator Haseeb Khan told BR Research.
Even before the contents of the two proposals had been made public, widespread condemnation of the bills was voiced in various news media. The Overseas Investors Chamber of Commerce and Industry expressed "dismay and pain", and termed the development "an obvious disadvantage to law abiding, ethical tax payers".
However, the new proposals have incorporated some measures that could work as the "stick" mentioned by Senator Khan. Foremost, the tax authorities have recommended that supporting legislation be introduced along with these bills which shall clamp down on tax evaders, from January 1, 2013; a day after the last day for availing the amnesty schemes.
FBR, with the help of NADRA is planning on freezing bank accounts, blocking telephone connections and restricting international travel of all individuals identified through NADRA, that fail to make good on this opportunity.
However, there are some aspects of these bills that require further scrutiny and analysis. For instance, the TRS 2012 allows registration of undeclared assets against a fee that ranges between Rs.39,000 (if availed in October 2012) and Rs.59,000 (if availed in December 2012). These numbers are likely to change in deliberations in coming days.
The guiding principle here must be that this fee should be comparable to the average payment made to tax consultants by an individual in the outgoing fiscal. However, the fee should also not exceed the average amount paid to grease palms and turn away the scrutinising eyes of the relevant authorities.
After all, any amnesty scheme will only appear lucrative if it eliminates the incentive to connive with authorities to evade taxes.
Secondly, the ITS 2012, provides an opportunity for funds to be transferred abroad through hundi, to be repatriated legally, while paying a full and final rate of investment tax of 1.5 percent. Further, tax dodgers may be able to declare future income in order to secure a lower tax rate under the amnesty schemes.
Despite the boisterous response to the proposals so far, tax amnesty schemes are not necessarily bad ideas in themselves. The key here lies in the enactment of supporting legislation along with thorough and transparent implementation.
Since times immemorial, the basic power of any state has been that of being able to impose and collect taxes. Here lies the collective failure of this state and nation.
To atone for this failure, the GoP has to follow a basic principle of equitable taxation. This mandates the filing of income tax returns, not simply submitting withholding tax statements; by every individual in the work force. While low income earners are exempted from income tax, they need not be exempt from filing tax returns.
Likewise, all three tiers of government have a role to play if all sectors are to be taxed equitably. While the Federal Government is ideally placed to reign in retailers and transporters; the provinces have a role to play in bringing the tax contribution of the agriculture sector at par with its share of the national income. Similarly the Federal Government also has a role to play in ensuring the collection of Capital Gains Tax on land and real estate transactions on real value instead of depressed or discounted values.
And finally, the tax authorities too must put the money where their mouth is and actually meet out the retribution they have threatened habitual evaders with. Given the fact that the overwhelming majority of citizens are registered with NADRA, the effective use of database and tracking technologies can extend the long arm of the law to every.
An old Urdu proverb, loosely translated states, "there was no respite for the only one who learnt the lesson". While the proposed tax amnesty schemes will only be effective if the reward and punitive actions are both cognisant of ground realities; they must be carved with caution to not leave honest tax payers at a disadvantage.

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