Tax amnesty: Hidden assets valued at Rs1.8tr declared

Published: July 12, 2018
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PHOTO:AFP

PHOTO:AFP

ISLAMABAD: The offshore and domestic tax amnesty schemes received ‘unprecedented’ response, as over 55,000 declarations were filed to whiten Rs1.8 trillion worth of hidden assets, said Ministry of Finance on Wednesday.

The Finance Ministry, for the first time, officially disclosed the provisional results of the tax amnesty scheme, which confirmed that contrary to the expectations the domestic tax amnesty scheme has so far received better response than the offshore tax amnesty scheme. The offshore scheme evoked poor response, as also confirmed by the statistics officially shared by the ministry.

The PML-N government announced the scheme with effect from April 10, primarily to offer last opportunity to Pakistanis, facing increasing problems due to tightening of tax laws by the Organisation for Economic Cooperation and Development (OECD). The domestic amnesty scheme had been included at the later stage of planning due to initial opposition by the Federal Board of Revenue (FBR).

Wealthy people seek just 2% tax on hidden assets

“So far, 55,225 declarations have been filed in which declared value of foreign assets is around Rs577 billion ($4.8 billion) and that of domestic assets is around Rs1.192 trillion,” stated the Ministry of Finance. The total value of the hidden assets declared under both the schemes was Rs1.8 trillion.

The assessment by the AF Ferguson consultancy firm showed that Pakistanis had $150 billion hidden foreign assets. It had hoped that about $3 billion to $5 billion could be repatriated to Pakistan.  However, the Ministry of Finance revealed that so far only $40 million have been repatriated.

It further added that declarants have paid around Rs97 billion in taxes. Out of which around Rs36 billion or $297 million have been collected on foreign assets and Rs61billion on domestic assets. “This response to the amnesty schemes has been unprecedented”.

The FBR’s spokesmen Dr Mohammad Iqbal had claimed that the tax authorities could get up to $4 billion in taxes from the offshore scheme. But so far the total tax collection from both the schemes is equal to only $800 million.

The Finance Ministry for the first time also tried to create fear of law in the hearts of those who have hidden there assets abroad. It said the low rates of the amnesty schemes ranging between 2% to 5% was a major incentive for declaring undeclared assets and income.

The ministry maintained that Pakistan has also become a signatory to the OECD Multilateral Convention which will provide access to information about offshore financial accounts of Pakistani residents from September 2018.

It added that this will enhance the capacity of the FBR due to access to offshore financial accounts of Pakistani residents held in the signatory countries. Necessary amendments have also been made in the Protection of Economic Reform (PERA) Act, 1992, to regulate foreign exchange movements and bring it in line with Income Tax Ordinance, 2001, it said.

Moreover, amendments have been made in the Income Tax Ordinance, 2001, whereby the FBR may inquire about the source of foreign remittance above Rs10 million and limitation of five years to probe foreign assets and income has been removed.

The original closing date for filing declarations under the amnesty scheme was June 30. It has been extended till July 31 due to short operational period after clearing legal and procedural challenges and problems faced by declarants in the payment of tax on foreign assets and repatriation of liquid assets.

The Presidential Ordinances amended the amnesty acts to extend the applicability date of the schemes and to include explanations on ambiguities such as exchange rate. The amendment ordinances have also provided for revision of declarations.

The amnesty scheme for foreign assets applies to both liquid and immovable assets such as bank accounts, shares and mortgaged properties. Tax rates range from 2% to 5%, depending on the type of asset. Special tax rate of 2% is applicable to liquid assets which are repatriated to Pakistan. The amnesty scheme for domestic assets covers all types of assets and income, with tax rates of 2% and 5%.

Explaining Pakistan’s ‘greatest’ tax amnesty scheme

The Finance Ministry also reiterated that the declarants were protected against any harassment and there was complete confidentiality of declarant’s information. Moreover, such information cannot be used as evidence against declarants under any other law, it added.

The official handout further said the Finance Minister Dr Shamshad Akhtar was closely monitoring the operation of the amnesty schemes and constantly advising both the FBR and the State Bank of Pakistan (SBP) for improving payment procedures and ensuring effective facilitation.

The government has issued rules for US dollar denominated bonds whereby the SBP has been authorised to issue these bonds having a maturity period of five years and annual profit of 3% to be paid semi-annually.

According to the rules, citizens of Pakistan can invest in these bonds out of remittances declared under the foreign amnesty or through encashment of foreign currency accounts held in Pakistan.

The Finance Ministry hoped that amnesty schemes will help in documentation of the economy as well as bring in onetime payment from non-declarant to officialise their assets.

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Reader Comments (2)

  • Rehan
    Jul 12, 2018 - 10:41AM

    What a way to turn the black money to white. Brazen and open. All criminals stealing nation’s wealth pardoned too. Wonderful chutzpah. It will give one more big jolt to the economy. Brace for worse times.Recommend

  • Zaida Parvez
    Jul 12, 2018 - 7:00PM

    Who will pay taxes? They will wait for amnesty schemes.Recommend

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