Tax amnesty offers no escape from prosecution

Way paved for legalising local, offshore hidden assets

ISLAMABAD: The ordinances providing tax amnesty do not provide any immunity to people affected by prosecution under anti-corruption, anti-money laundering and counter-terrorism financing laws.

President Mamnoon Hussain promulgated four ordinances on Sunday, paving the way to yet another tax amnesty scheme, legalising local and offshore hidden assets.

For the time being, the government also backed out from its announcement of lowering property tax rates and acquiring the right to take over properties by paying owners higher than declared prices.

Prime Minister Shahid Khaqan Abbasi had declared that the government could take over properties to discourage tax evasion and keep a check on the real estate sector.



The government also did not lower income tax rates for the Association of Persons, which would still pay at the maximum rate of 35 per cent. However, individual income tax rates have been cut with effect from July who will now pay at the highest rate of 15 per cent plus a fixed tax for the highest two income slabs.

It seems that the Federal Board of Revenue (FBR) is trying to recoup some losses that it sustained because of the prime minister’s decision to steeply cut income tax and property tax rates.

Objections raised by the Financial Action Task Force to the amnesty scheme also forced the government to withhold its decision to give immunity from prosecution under the National Accountability Ordinance, Federal Investigation Agency Act, Election Commission of Pakistan Act, Anti Money Laundering Act, Anti-Terrorism Act and Anti-Smuggling Act.

The President promulgated Foreign Assets Declaration and Repatriation Ordinance of 2018, Pakistan Economic Reforms Protection Act Amendment Ordinance of 2018, the Voluntary Declaration of Domestic Assets Ordinance of 2018 and Income Tax Amendment Ordinance of 2018.

These ordinances will take effect from April 10 and the window to avail the schemes will close on June 30 this year.

All four ordinances will have overriding effects over all the existing laws but criminal proceeds cannot be legalised under these legislations, said Dr Miftah Ismail, the Adviser to the Prime Minister on Finance.

Dr Ismail said that immunity cannot be provided to those who made assets through corruption, therefore, the government did not specifically mention the NAB Ordinance under the immunity clauses.

Dr Miftah Ismail also said that the issue of acquiring the right to take over properties will be decided in consultation with provinces. He said that this will be enforced through the Finance Bill that the government will table on April 27.

The government also barred politicians who have held public offices since January 2000 from availing the scheme. Judges of courts have also been barred from taking benefit.

All Pakistani citizens, including non-resident Pakistanis, except holders of public office, their spouses and dependent children can avail the schemes.

The foreign assets can be repatriated at 2% rates. Those who would declare their foreign assets but would not repatriate will have to pay 5% tax. The domestic assets will be declared at 5% tax.

Declaration of foreign assets would not be used as evidence in any court of law against the declarant.

However, foreign assets disputed in courts or where legal proceedings are under way cannot be declared under the scheme.

The government has defined the “foreign assets” as “any movable or immovable assets held outside Pakistan and includes real estate, mortgaged assets, stock and shares, bank accounts, bullion, cash, jewels, paintings, accounts and loan receivables, beneficial ownership or beneficial interests or contribution in offshore entities and trusts”.

The declaration of foreign assets will be made electronically on FBR’s web portal and will be valid only if it is accompanied by the evidence of tax payment.

The value of a foreign asset will be declared in rupees but tax will be paid in US dollars. The State Bank of Pakistan (SBP) will notify the mode and manner of repatriation of liquid assets in Pakistan.

The government has assured complete confidentiality to individuals availing the scheme. Information about them cannot even be disclosed under the Right of Access to Information Act, 2017 and any other law in force.



The Ordinance states that if any person discloses any particulars, he will be liable to up to Rs1 million fine or imprisonment for a term not exceeding one year or with both.

Income Tax Ordinance

The government has also allowed the FBR to ask about the source of foreign remittances, if the value of remittances exceeded Rs10 million in a tax year. Individuals with foreign incomes and assets will now be required to file their returns and statements. In case of offshore assets, the FBR obtained the right to open old cases, abolishing the five-year threshold.

Through an amendment in the Protection of Economic Reforms Act of 1992, the government has authorized the FBR to ask the source of dollars being deposited in the Foreign Currency Accounts, partially withdrawing the secrecy clause. This will address the FATF’s concerns.

Moreover, from now onward, only income tax return filers will be allowed to open foreign currency accounts.

Voluntary Declaration of Domestic Assets Ordinance

The government also offered Foreign Currency Accounts holders to declare their liquid assets at only 2% tax. For all other domestic assets the rate will be 5%. The government has also given a mechanism to determine the value of domestic assets. Open plots will be valued at either FBR’s valuation or the cost of acquisition, whichever is higher. Super structures will be assessed at Rs400 per square foot and apartments at the cost of acquisition or the provincial stamp duty rates, whichever is higher.