Tax amnesty on the cards

In continuation of the Senate Standing Committee’s recent proposal that the government should offer tax amnesty to all sectors of the economy rather than just real estate, the Finance Minister has dropped a hint that such a policy may be in the works. During his address at the Federal Board of Revenue on January 5, Mr Dar stated that a way out could be found for those who wish to come into the tax net. According to reports, this policy is in the works to facilitate those Pakistanis who have their assets stashed abroad and are facing increasing scrutiny from tax authorities in foreign countries. This change in stance towards tax evasion has taken place following the Panama leaks. It is expected that this amnesty scheme which is being promoted by the government as a way to generate income for Pakistan by bringing more individuals into the tax net, will benefit those Pakistanis whose names have appeared in the Panama leaks. It is also important to note here that despite the government offering a substantial amnesty to the real estate sector, the number of individuals who have used this facility is quite low. Therefore the efficacy of this current scheme is also doubtful.

The proposed scheme and three other such amnesties offered by our present government fail to take into account the myriad of issues due to which tax collection is such an onerous and largely unsuccessful task. It is not just individuals who evade taxes, but also businesses which exist in Pakistan’s very large undocumented economy. The loopholes in our tax code and lax implementation of the same by the FBR must also be looked into and overhauled. The course correction required to revamp our tax system must also take into account the level of corruption and graft that has become a built in and accepted feature of this system. There are very few individuals and businesses who pay taxes willingly. It is always strong legislation and its implementation by all concerned which resolves this issue. Offering amnesty after amnesty is a band-aid measure rather than the cure for Pakistan’s tax collection problem.

Published in The Express Tribune, January 7^th, 2017.

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