The Supreme Court has cleared the tax amnesty scheme announced on 5 April by former Prime Minister Shahid Khaqan Abbasi, promulgated through issuance of ordinances by the President of Pakistan and, then subsequently made part of the Finance Act 2018. There was considerable criticism at the time as to why this scheme was not laid before parliament in the form of a bill despite of the fact that the PML-N clearly had the numbers to ensure its passage. Be that as it may, the important question remains whether the scheme has any potential to generate foreign exchange for the country at no cost to the exchequer (no borrowing costs) given that the country's current account deficit for the first 10 months of the current fiscal year (July-April) has widened to 14.03 billion dollars against 9.35 billion dollars for the comparable period of the year before as per the State Bank of Pakistan - a rise of 50 percent - would be in dollars.
The three options allowed in the tax amnesty scheme are: (i) repatriated liquid assets would be liable to a tax of 2 percent; (ii) liquid assets not repatriated would be liable to a higher tax of 5 percent while immoveable assets would be liable to 3 percent tax; and (iii) the option with the most potential envisages investment of repatriated assets in government bonds for up to 5 years with six-monthly payment in rupees at the rate of 3 percent, payable at the dollar-rupee exchange rate at the time of the payment of profit. Although the outgoing finance minister Miftah Ismail did state that rules governing the bond issue would be announced soon, these rules remain unannounced as yet. As a matter of fact, "the scheme has yet to be introduced by the government of Pakistan through State Bank of Pakistan by notification in the official gazette specifying periodic rate of return, period for rate of return and period of maturity". Sadly, one would be compelled to maintain that the functioning of the government leaves much to be desired as far as taking benefit from this option is concerned.
What is required is a determined, focused and proactive campaign to make this scheme that has all the portents to alleviate our present problems of dwindling forex reserves and current account deficit, a grand success. This would require the government to organize road shows to actively market the bonds, launch blitzkrieg media campaign to create awareness about the short-term and long-term positives of this scheme to the owners of undeclared assets and extend the period of the scheme beyond the present 30th June deadline. Although this newspaper has always, on principle, opposed grant of extension in tax payment deadlines but in the instant case where the option with the highest potential to rake in foreign exchange for the country under this scheme, ie, the bonds, has remained a nonstarter because of inaction on the part of the government, an extension in the deadline would be in order. We are not unmindful of the compelling need for receipts under this scheme before 30th June 2018 to meet the country's payment commitments that would become due by then. Therefore, we propose that the deadline for declaration should be extended with the proviso that all funds whether for tax on fixed assets or non-repatriated liquid assets and funds representing repatriation of liquid assets and investment in bonds should be received in the State Bank by 30th June 2018. That would allow additional time for the declarers to map out their declarations on the basis of remitted funds and the government's need for receipts by end June 18, 2018 too would be met.
To conclude, if the caretakers determine that the scheme has potential to mitigate the deficit in the current account as well as shore up our fast depleting foreign exchange reserves then they must begin to take all stakeholders on board, including political parties; and try to convince them that an extension maybe appropriate if the scheme is to be successful then the government would no longer need to acquire more loans while if it is not successful it would be at no cost to the exchequer.