At cross purposes again
Politicians are reluctant to withdraw the shield enjoyed by the foreign currency account holders
Given the ambivalence of political leaders and bureaucrats on the issue of offshore tax amnesty, it will be hard to introduce curbs on the inflow of foreign currency or withdraw secrecy available to foreign currency account holders, as recommended recently by an apex court-constituted committee. The panel’s road map to retrace and recover cash and properties held abroad is unfortunately littered with political landmines. Amidst this is the huge government temptation of one more tax amnesty scheme — one that will enable people to legalise their concealed foreign assets at low tax rates. This is a risky business primarily because tax evaders habitually need specific amnesty every now and then despite the existence of permanent amnesty as offered through Section III (4) of the Income Tax Ordinance 2001, section 5 of the Protection of Economic Reforms Act of 1992 and Foreign Currency Account (Protection) Ordinance 2001. And it is time the government locked out the possibility for good.
In the strictest sense, all tax amnesty and money-whitening schemes are in breach of Articles 4 and 5 of the Constitution. These are a slap in the face of honest and regular taxpayers.
Politicians are reluctant to withdraw the shield enjoyed by the foreign currency account holders against any investigation by the FBR or any government agency. The committee headed by a State Bank of Pakistan official wants to halt foreign exchange deposits made through the open market and transferred into locally maintained accounts. It also wants to guard against the misuse of the Income Tax Ordinance clause that treats these funds as foreign remittances and helps whiten this money. The committee should probably expect a giant wall of opposition to these proposals.
The amnesty scheme, eyed by the government, would be a disaster especially since it is likely to come without any legislation for seizing undeclared and untaxed assets in case a defaulter snubs the offer altogether. Such offers rarely succeed because they can never increase revenue — much as the expectation may be — but what they do instead is fuel distrust in the overall system. That is why our economic managers should stick with time-tested, pragmatic measures to tackle tax evasion and raise revenue to a more respectable level.
Published in The Express Tribune, March 16th, 2018.
In the strictest sense, all tax amnesty and money-whitening schemes are in breach of Articles 4 and 5 of the Constitution. These are a slap in the face of honest and regular taxpayers.
Politicians are reluctant to withdraw the shield enjoyed by the foreign currency account holders against any investigation by the FBR or any government agency. The committee headed by a State Bank of Pakistan official wants to halt foreign exchange deposits made through the open market and transferred into locally maintained accounts. It also wants to guard against the misuse of the Income Tax Ordinance clause that treats these funds as foreign remittances and helps whiten this money. The committee should probably expect a giant wall of opposition to these proposals.
The amnesty scheme, eyed by the government, would be a disaster especially since it is likely to come without any legislation for seizing undeclared and untaxed assets in case a defaulter snubs the offer altogether. Such offers rarely succeed because they can never increase revenue — much as the expectation may be — but what they do instead is fuel distrust in the overall system. That is why our economic managers should stick with time-tested, pragmatic measures to tackle tax evasion and raise revenue to a more respectable level.
Published in The Express Tribune, March 16th, 2018.