$15-25 billion assets may be declared under amnesty scheme: expert

The Tax Amnesty Scheme to declare local and foreign assets may possibly lead to asset declarations of Rs 2-3 trillion ($15-25 billion) with expectations to result in tax revenue of over Rs 100 billion (0.3 percent of GDP), tax expert Saad Hashmi said.
This tax revenue will help to some extent in bridging the widening fiscal deficit of the country that is reported at 6.1 percent of GDP during July-May 2018. Former government on April 05, 2018 announced the Tax Amnesty Scheme offering the Pakistani citizens living in the country or abroad to declare their undeclared local and foreign assets. With only three working days left before the expiry date (June 30, 2018), the Tax Amnesty Scheme is finally gathering steam, Saad Hashmi, an analyst at Topline Securities said.
Key trigger that has changed the Amnesty Scheme's outlook was the favourable ruling by the Supreme Court on June 12, 2018 that stated it would not interfere into the workings or modalities of the scheme.
Hashmi further said many of operational and regulatory issues have been addressed that has led to robust response. The Central Depository Company of Pakistan Limited (CDC) amended rules to allow free transfer of securities under tax amnesty scheme. A few days ago, rules and modalities relating to dollar bonds that can be purchased from declared assets have been approved by State Bank of Pakistan (SBP).
"As per our channel checks and assessments, we are of the view that the scheme could possibly lead to asset declarations of Rs 2 to 3 trillion or $15-25 billion," he said. It is expected to result in tax revenues of over Rs 100 billion (0.3 percent of GDP) and would help to some extent in bridging the widening fiscal deficit of the country (reported at 6.1 percent of GDP during July-May 2018).
Given expectations of declarations of $25-30 billion, inflows of up to $2 billion can be expected. This would include both payment of penalty amount on foreign assets and repatriation of foreign assets.
According to Member Inland Revenue, Federal Board of Revenue, the FBR expects inflows of $3-4 billion. "This estimate is higher than our expectations". The amnesty scheme will help in alleviating some pressure on foreign exchange reserves, which have fallen to $10.3 billion as of June 14, 2018 (only 2 months import cover).
Indonesia had launched an ambitious tax amnesty scheme in July 2016 that continued for 9 months. Around $360 billion in assets were declared while $11 billion foreign assets were repatriated. The government earned around $8.5 billion in tax revenues. Indonesian economy is three times bigger than Pakistan's economy.
"We believe that if the deadline of the Tax Amnesty Scheme is extended beyond June 30, 2018, then our initial expectations may possibly be realized," Hashmi said.
Extension of the scheme is possible via Presidential Ordinance and getting approval by Federal Cabinet.
Previous amnesty schemes in Pakistan were different. The 2000 Amnesty Scheme was similar but it was not offered on Foreign Assets. Then, over Rs 100 billion was declared and Rs 10 billion in taxes were collected. "Since 2000 to date, property prices and hence undeclared wealth has increased manifold due to which we expect manifold increase this time around," he said.