Tax amnesty scheme announced

After seeking approval from the federal cabinet, the government Tuesday announced Assets Declaration Scheme-2019 to provide an opportunity to the general public to regularise both domestic and foreign assets/expenditures, including Benami assets/accounts, at the rate of 4 percent and declaration of foreign assets, if not repatriated back into Pakistan, at 6 percent.
The scheme can be availed by all companies, associations of persons and individuals. This was stated by Adviser to the Prime Minister on Finance Dr Abdul Hafeez Shaikh while addressing a press conference here at Federal Board of Revenue (FBR) on Tuesday. He was accompanied by Federal Board of Revenue (FBR) Chairman Syed Shabbar Zaidi, Minister of State for Revenue Hammad Azhar and Special Assistant to the Prime Minister (SAPM) on Information and Broadcasting Dr Firdous Ashiq Awan.
Dr Hafeez Shaikh said that the scheme would be applicable up to June 30, 2019 and there would be no extension in the deadline of June 30. The public office holders and their dependents, as defined under Income Tax Ordinance 2001, cannot avail the Assets Declaration Ordinance 2019. The Benamidars of the public office holders are also not entitled to avail the scheme. The scheme would not be applicable beyond June 30, 2019, he made it clear.
Under the scheme, the domestic and foreign assets would be legalised at the rate of 4 percent. This is subject to the condition that the amount should be held in a bank account. The foreign liquid assets repatriated into Pakistan would be subject to 4 percent tax and foreign liquid assets not repatriated into Pakistan would be legalised on payment of 6 percent tax (additional 2 percent tax).
The new scheme imposed restriction that the declared amount would have to be deposited into a bank account for availing it.
For the whitening of immoveable properties, FBR Chairman Shabbar Zaidi said that real estate assets must be declared on FBR's notified values. The FBR's declared values of immoveable properties would be taken for payment of tax for legalisation of immovable properties. The value should not be less than 150 percent of the FBR's value and it can be legalised on payment of 1.5 percent tax.
Dr Hafeez Shaikh said that the government has passed the Benami Law and anyone having Benami properties/accounts does not imprisonment the scheme, would face harsh punishments like confiscation of assets and jail under the law. The owners of Benami assets must avail the scheme to avoid punishments, he said.
"The Benami law is operational and provide us stick that empowers FBR to imprison those found guilty of it. We want to provide last opportunity to those who want to avail this scheme. Now the data of all regulators such as FBR, SBP, SECP, Nadra and FIA as well as others' has been integrated to broaden the tax base," Dr Hafeez Shaikh said.
He added that the FBR obtained data about 150,000 account holders from 28 countries that would also help the FBR bring them into tax system.
State Minister for Revenue Hammad Azhar said if the FBR value of any property stands at Rs 1 million then its declaration would go up to Rs 1.5 million under this scheme.
The businessmen out of the sales tax net can avail the scheme. The business community can legalise their undeclared sales tax on payment of 2 percent of the total calculated sales tax. Sales tax liabilities can be cleared on payment of 2 percent tax under the scheme.
Minister of State for Revenue Hammad Azhar said that a major difference between the old scheme and the new one is that now it would be mandatory for the declarant to become tax filer. Under the old scheme, it was not mandatory for the declarant to become tax filer, he added.
A major facilitation has been provided to the business community under the scheme as they have been allowed to revise their balance sheets. Under the new scheme, provision for revision of balance sheet has been provided.
Under the old scheme, Hammad said that the cash in hand was allowed and now all cash in hand has to be declared in the bank accounts under the new scheme.
Dr Hafeez Shaikh said, "We have tried to make this scheme very easy to understand and implement. The basic purpose of the scheme is not to generate revenue but to document the economy and to bring dead assets into the economy and make them functional."
The philosophy behind the plan is not to "intimidate" people but to encourage businessmen to participate in the legal economy, the adviser said.
Reuters adds: The Finance advisor Abdul Hafeez Shaikh said the move was intended to bring undeclared assets held either at home or abroad into the regular economy, which has long suffered from rising deficits and chronic underinvestment.
"The purpose of this scheme is for assets, which are kind of dead assets, to be part of the economy, to make them operational," he told a news conference following a cabinet meeting in Islamabad.
Facing a budget deficit, the International Monetary Fund expects to top 7 percent of gross domestic product this year and under pressure to find billions of dollars to reduce the gap, the government is expected to step up efforts to raise tax.
In a country where only a million people out of a population of more than 200 million pay income tax, increasing the amount of tax raised has been a problem for successive governments.
The IMF plan will require the government to bring the primary budget deficit, which excludes debt servicing costs, down to 0.6 percent of GDP next year from a forecast level of more than 2 percent.
That will require it to squeeze around $5 billion in extra taxes or spending cuts from Pakistan's roughly $300 billion economy next year alone.
Under the measures announced on Tuesday, non-declared assets can be regularized on payment of a 4% levy, with property assets levied at 1.5%, Shaikh said.
"We have kept it realistic. The rates haven't been set high," he said, adding that the scheme would run until June 30.
The amnesty represents a turnaround for Prime Minister Imran Khan who accused previous governments of using amnesties to clean up illegally acquired wealth hidden outside Pakistan.
Shaikh, who joined the government last month following a shakeup of Pakistan's top economic policy makers, defended the IMF accord from opposition criticisms, saying the belt-tightening measures expected to be required were in the country's own interests.
"I think that the things we are going to do are the ones which Pakistan needs at present," he said.
On Sunday, Pakistan agreed a $6 billion loan package from the IMF to bolster its faltering economy, which is expected to see a sharp slowdown in growth to 2.9 percent this year from 5.2 percent last year, according to IMF projections.
Details of the package, which must still be approved by the IMF board, are sketchy but are expected to include raising taxes, increasing energy prices as well as loosening controls on the rupee currency, which has lost a third of its value over the past year.