International Monetary Fund (IMF) has strongly opposed the proposed tax amnesty scheme under consideration by the Khan administration stating categorically that "such schemes fail to achieve their intended objectives". Business Recorder sent out written questions to IMF office in Islamabad for an official response on the proposed amnesty scheme to give a last chance to benami account or asset holders.
Teresa Daban Sanchez Resident Representative of IMF wrote: "IMF position against tax amnesties is well known. Cross country experience shows these schemes usually are not successful in mobilizing revenues and are quite damaging to the moral of obliging taxpayers". IMF in its second review under the Extended Arrangement and Request for Waivers of Nonobservance of Performance Criteria on March 28, 2014, had opposed the amnesty scheme launched by the PML-N government termed an investment package and stated that "staff considers that, while the package might lead to some additional revenues in the short-run, it will likely hinder the system in the long-run. The package opens another loophole in the system in addition to the ones that already exist for remittances and equity stock investment, and raises potential money laundering risks. The immunity from routine audit hinders the self-assessment process, and the amnesty-entailed by waiving penalties and interests-is likely to be detrimental to improving compliance and collections as taxpayers will develop an expectation of future immunities."
The review further stated "Staff has strong reservations regarding the Prime Minister''s investment incentive package introduced in December 2013. This tax amnesty runs counter to efforts to strengthen tax administration". Sources in the Finance Ministry revealed that with the exit of Asad Umar from the cabinet, the fate of proposed tax amnesty scheme hangs in the balance as he had failed to convince some cabinet colleagues.
A special meeting of the federal cabinet called by Prime Minister Imran Khan on April 17 failed to approve the proposed amnesty scheme and postponed the matter till next cabinet meeting for further deliberations scheduled for April 23 (Tuesday).
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