Offshore wealth: Tax amnesty to lure back money opposed

Published: April 27, 2017
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PHOTO: FILE

PHOTO: FILE

ISLAMABAD: Mainstream political parties that have a presence in parliament on Wednesday opposed the government’s move to offer a tax amnesty scheme in order to lure Pakistanis who have stashed money abroad to bring their wealth back.

The government put to test the idea of giving the tax amnesty scheme to regularise hidden offshore wealth by influential Pakistanis in a meeting of the National Assembly Standing Committee on Finance and Revenue.

Lawmakers belonging to the PTI, the PPP and the MQM opposed the move. However, the standing committee supported a proposal to withdraw a secrecy clause from the Income Tax law that protects recipients and senders of foreign remittances from disclosing the source of remittances.

The State Bank of Pakistan has floated the budget proposal aimed at plugging a source of money laundering. The ball is now in the court of the government.

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Committee Chairman Qaiser Ahmad Sheikh of the PML-N sought the views of the parliamentarians on the Tax Reforms Commission’s proposal to legalise offshore wealth by paying 15% tax.

Federal Board of Revenue Chairman Dr Mohammad Irshad said the tax amnesty proposal was “under consideration of the FBR” but he refrained from giving his views on the matter.

“I am okay with the idea of not putting someone behind bars, but what is the logic of reducing the tax rate to 15% when an individual is honestly paying 30% tax on his income and not hiding the source of his income?” asked PTI’s Asad Umer.

Umer said the government should not engage billionaires, who have looted the public purse or evaded taxes by hiding their real incomes, in discussing the scheme.

Tightening of global financial regimes to curb money laundering and terrorism financing has now made it difficult to park undeclared wealth in tax havens.

PTI Chairman Imran Khan had already opposed any tax amnesty scheme. Khan tweeted a story that appeared in The Express Tribune and said: “The PTI opposes all schemes to whiten money stolen from the people of Pakistan, especially those benefitting past and present public office holders.”

The Express Tribune had reported that the government and businesses were finalising the Foreign Asset Tax Bill, 2017, to give a general tax amnesty scheme.

The scheme shall also be applicable to people holding public offices provided that in such cases all assets created at the time when the person was a public officeholder are brought back to Pakistan, according to the text of the scheme that has been prepared by the chartered accountancy firm, AF Ferguson.

The text has to be vetted by the finance ministry and cannot be treated as the final version at this stage.

Politicians, who would avail the scheme and declare their hidden assets abroad, would be able to dodge disqualification as they would get immunity from the election law, according to the AF Ferguson model.

The highest rate it has proposed is 20%, but only in case where the assets are in liquid shape and not repatriated to Pakistan after their declaration.

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According to AF Ferguson’s assessment, Pakistanis have parked about $150 billion worth of assets abroad. Of which, $40 billion are parked in foreign real estate — either through offshore entities or directly.

Another $40 billion are in bank balances; $20 billion are in the shape of shares in Pakistani companies and $50 billion are in the shape of other assets, including manufacturing concerns.

But its assessment is that at best ‘$3 billion to $4.5 billion’ will be repatriated to Pakistan, and still the firm is keen to give a clean chit to the violators by levying a penalty of as low as 2%.

This could be the fourth tax amnesty scheme over the last three years by the PML-N government. But unlike in the past, the authorities concerned are now planning to include ‘public officeholders’ among the beneficiaries.

PPP’s Syed Mustaffa Mehmood and MQM’s Mohammad Ali Rashid also opposed the scheme, questioning the rationale of providing safe passage to those who violated numerous laws of the country to evade taxes.

However, PML-N’s Sheikh Fayyazuddin and Pervaiz Malik supported the scheme. The business community representative also opposed the amnesty scheme, urging the government to take a stand against tax dodgers.

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