PTI govt announces tax package to boost revenue
Finance Minister Asad Umar says steps afoot to stop unchecked outflow of dollars
PM Imran Khan listens as Finance Minister Asad Umar speaks. PHOTO: PTI
ISLAMABAD:
With the new budget coming up, the Pakistan Tehreek-e-Insaf (PTI) government announced on Tuesday its first tax amnesty scheme on hidden domestic and offshore assets - in an attempt to boost the sinking tax revenue.
Besides, the government announced that it would stop the unchecked outflow of dollars through foreign currency accounts, declaring its intention to amend laws to link the outflows for investment with the approval of the authorities.
"An asset declaration scheme will be announced before the budget," Finance Minister Asad Umar told journalists.
He added that the schemes would be applicable to both domestic and offshore assets. "The government has not yet finalised the tax rates for the amnesty scheme."
The timing is crucial for the government, as the announcement comes before the signing of its agreement with the International Monetary Fund (IMF), dodging the international lender's approval of the move.
An IMF team is expected to visit Pakistan in the third week of April. The government also wants to use the scheme to enhance its tax collection, which has fallen short of target by a whopping Rs318 billion during the first nine months of the fiscal year.
This would be the Federal Board of Revenue's (FBR) 11th tax amnesty scheme. All the past tax amnesty schemes have failed to achieve the desired results.
Umar said people were facing problems because of the application of various laws including the Benami Transactions Prohibition Act.
He added that the government wanted to give one last chance to people to declare their assets, hidden both in Pakistan and abroad.
Minister of State for Revenue Hammad Azhar said the FBR had served first six tax notices under the Benami Transactions Prohibition Act on Tuesday.
In the past, the PTI had severely criticised the PML-N government for offering four tax amnesty schemes in five years. The PML-N government's last tax amnesty scheme was for both domestic and offshore assets.
The minister said the government would keep in mind the concerns of the Financial Action Task Force (FATF). In April last year, the FATF had raised concerns about the adverse effects of Pakistan's tax amnesty scheme on the global fight against terror financing and money laundering.
Every successive government has offered the "last tax amnesty scheme" in its wisdom, each time hoping that it would be the last chance for tax evaders and non-filers.
In January 2016, while debating the 9th tax amnesty scheme in a National Assembly Standing Committee on Finance meeting, Umar had said the country's tax system was faulty, compelling even honest people to avoid the tax net.
"Until the government addresses the issues of smuggling and under-reporting, people will continue accumulating assets, and the government would keep on offering one amnesty scheme after another," Umar had said at that time.
However, the PTI government has not yet taken steps to address the issues of under-invoicing and smuggling in its tenure so far.
Pakistan faces a daunting task of cracking down against tax evasion, as only 1.8 million people file their annual income tax returns. The direct taxes collection amount to only 37 per cent of the total collection and most of it is collected by levying over 72 kinds of withholding taxes.
The previous government had announced the tax amnesty schemes to allow people to declare their hidden domestic and offshore assets amid a drive against tax evasion by the Organisation for Economic Cooperation and Development.
The PML-N government had offered Pakistanis to declare their offshore assets at a five per cent tax rate. For repatriation of liquid assets to Pakistan, the rate was only three per cent. The government had determined a five per cent rate for the disclosure of domestic hidden assets.
The scheme was also expected to provide a boost to the country's depleting foreign currency reserves. However, the objective of providing a cushion to the foreign currency reserves could not be achieved.
Umar said the government was in process of amending the Protection of Economic Reforms Act of 1992 and Foreign Exchange Regulations Act to stop the unchecked outflow of dollars through foreign currency accounts.
He said according to the proposal, individual account holders would have to seek permission of the State Bank of Pakistan or the Economic Coordination Committee of the Cabinet, depending upon the size of the outward remittance, if they wanted to take their money out for investment.
The finance minister added that the government planned to lower the withholding tax rates on properties to encourage people to declare their properties at market rates.
At present, there are three valuation rates and people pay taxes at deputy collector rates that are hardly 40 per cent of the market value.
With the new budget coming up, the Pakistan Tehreek-e-Insaf (PTI) government announced on Tuesday its first tax amnesty scheme on hidden domestic and offshore assets - in an attempt to boost the sinking tax revenue.
Besides, the government announced that it would stop the unchecked outflow of dollars through foreign currency accounts, declaring its intention to amend laws to link the outflows for investment with the approval of the authorities.
"An asset declaration scheme will be announced before the budget," Finance Minister Asad Umar told journalists.
He added that the schemes would be applicable to both domestic and offshore assets. "The government has not yet finalised the tax rates for the amnesty scheme."
The timing is crucial for the government, as the announcement comes before the signing of its agreement with the International Monetary Fund (IMF), dodging the international lender's approval of the move.
An IMF team is expected to visit Pakistan in the third week of April. The government also wants to use the scheme to enhance its tax collection, which has fallen short of target by a whopping Rs318 billion during the first nine months of the fiscal year.
This would be the Federal Board of Revenue's (FBR) 11th tax amnesty scheme. All the past tax amnesty schemes have failed to achieve the desired results.
Umar said people were facing problems because of the application of various laws including the Benami Transactions Prohibition Act.
He added that the government wanted to give one last chance to people to declare their assets, hidden both in Pakistan and abroad.
Minister of State for Revenue Hammad Azhar said the FBR had served first six tax notices under the Benami Transactions Prohibition Act on Tuesday.
In the past, the PTI had severely criticised the PML-N government for offering four tax amnesty schemes in five years. The PML-N government's last tax amnesty scheme was for both domestic and offshore assets.
The minister said the government would keep in mind the concerns of the Financial Action Task Force (FATF). In April last year, the FATF had raised concerns about the adverse effects of Pakistan's tax amnesty scheme on the global fight against terror financing and money laundering.
Every successive government has offered the "last tax amnesty scheme" in its wisdom, each time hoping that it would be the last chance for tax evaders and non-filers.
In January 2016, while debating the 9th tax amnesty scheme in a National Assembly Standing Committee on Finance meeting, Umar had said the country's tax system was faulty, compelling even honest people to avoid the tax net.
"Until the government addresses the issues of smuggling and under-reporting, people will continue accumulating assets, and the government would keep on offering one amnesty scheme after another," Umar had said at that time.
However, the PTI government has not yet taken steps to address the issues of under-invoicing and smuggling in its tenure so far.
Pakistan faces a daunting task of cracking down against tax evasion, as only 1.8 million people file their annual income tax returns. The direct taxes collection amount to only 37 per cent of the total collection and most of it is collected by levying over 72 kinds of withholding taxes.
The previous government had announced the tax amnesty schemes to allow people to declare their hidden domestic and offshore assets amid a drive against tax evasion by the Organisation for Economic Cooperation and Development.
The PML-N government had offered Pakistanis to declare their offshore assets at a five per cent tax rate. For repatriation of liquid assets to Pakistan, the rate was only three per cent. The government had determined a five per cent rate for the disclosure of domestic hidden assets.
The scheme was also expected to provide a boost to the country's depleting foreign currency reserves. However, the objective of providing a cushion to the foreign currency reserves could not be achieved.
Umar said the government was in process of amending the Protection of Economic Reforms Act of 1992 and Foreign Exchange Regulations Act to stop the unchecked outflow of dollars through foreign currency accounts.
He said according to the proposal, individual account holders would have to seek permission of the State Bank of Pakistan or the Economic Coordination Committee of the Cabinet, depending upon the size of the outward remittance, if they wanted to take their money out for investment.
The finance minister added that the government planned to lower the withholding tax rates on properties to encourage people to declare their properties at market rates.
At present, there are three valuation rates and people pay taxes at deputy collector rates that are hardly 40 per cent of the market value.