Judiciary, politicians must back tax amnesty scheme: FBR
PTI govt considering regularising only those foreign assets that would be converted to money & remitted to the country
Representational image. PHOTO: REUTERS
ISLAMABAD:
The Federal Board of Revenue (FBR) has advised Prime Minister Imran Khan to take the judiciary and political leadership into confidence for the success of the Pakistan Tehreek-e-Insaf (PTI) government's upcoming tax amnesty scheme.
The tax authority has also requested the prime minister to mitigate any objections the Financial Action Task Force (FATF) and International Monetary Fund (IMF) could raise over the scheme before it was launched.
If Finance Minister Asad Umar secures the IMF's nod next week, the scheme may be announced on April 15.
All companies and individuals would be entitled to avail the scheme except public office-holders and their relatives. The condition applies to those who have been in office since January 2000.
The FBR put forward the advice in its first presentation to the prime minister on Friday. Khan endorsed the scheme in principle, but asked the finance ministry to make it more stringent.
PML-N slams PTI govt’s U-turn on tax amnesty scheme
Sources in the FBR said the judiciary must be taken into confidence for the success of the scheme. Similarly, the entire political leadership needs to own it to make it work.
Corruption proceeds cannot be legalised under the scheme. However, but it is unclear as to who would determine whether or not the money declared was the proceeds of corrupt practices.
The Pakistan Muslim League-Nawaz's (PML-N) government's last comprehensive offshore and domestic assets tax amnesty scheme faced headwinds at the start because of a case in the Supreme Court. The government had to give a one-month extension to provide more time to people.
The current government's tax amnesty scheme would be available to the owners of Benami assets. Those who have hidden sales proceeds in the past would also be allowed to avail it. The revision of balance sheets by companies would be permitted and litigation cases allowed to be settled.
Ill-gotten wealth acquired as of June 2018 could be legalised under the scheme.
The government is considering regularising only those foreign assets that would be converted into money and remitted in the form of rupees to Pakistani banks or deposited into the declarant's own foreign currency bank account in the country.
The sources said the government would offer the scheme on Benami assets, foreign liquid assets repatriated to Pakistan, credit entries into own bank accounts, credit entries into Benami bank accounts and all types of other assets. The FBR had proposed 1% to 10% tax rates for regularising these assets.
However, the political leadership did not accept these rates and asked the government to increase them significantly to address moral-hazard objections. Tax amnesty schemes are taken as a source of discouragement for those who file their returns and pay their taxes.
The FBR wants that own-account credit entries should be allowed to be declared at only 1% of the total credit entries from July 2013 to June 2018 or 10% of the peak credit entries, whichever is higher.
For Benami credit entries, the FBR has recommended a 2% rate of the total credit entries from January 2017 to April 2019 or 10% of the peak credit entries.
The FBR has proposed a 10% rate for Benami assets, but the political leadership wants it to be increased to 25%.
For the repatriation of liquid assets to Pakistan, the FBR only wants a 5% rate, which is expected to be increased after input from the prime minister.
The premier is opposed to the idea of allowing offshore assets to be declared under his government's first tax amnesty scheme. However, the finance ministry wants that at least those assets that can be repatriated to Pakistan should be allowed, the sources said.
Many people have kept their foreign assets in trusts. A proposal has been floated that their trustees should be permitted to avail the scheme. These trustees are often banks. In certain trusts, beneficiaries are not defined. To address the problem, the government will have to allow declaring trusts at a certain percentage. The repatriation of trusts is not possible.
The tax authority wants that the declaration of open plots, apartments and land be allowed at the acquisition cost or the FBR values on April 15 this year.
The scheme may also allow declaration of vehicles at their original registration cost.
Gold could be declared at Rs5,000 per gram value. The maximum value of the gold that can be declared under the scheme may not be more than Rs5 million.
The sources said unlike the last tax amnesty scheme, the filing of income tax returns or the revision of the last tax return would be mandatory.
Similarly, those declaring hidden sales would also have to file their sales tax returns. They would need to declare the last five years' undisclosed sales and payments of 3% sales tax and federal excise duty.
The black money declared under the scheme would have to be deposited in a bank account and the balance retained till June 30.
Those availing the scheme would have to withdraw their tax appeals and writs filed in courts. Cases pending before a court would be excluded from the amnesty scheme, except old ones.
Last amnesty scheme
Around 6,195 individuals had availed the offshore tax amnesty scheme launched by former prime minister Shahid Khaqan Abbasi in 2018. They legalised assets worth Rs1.1 trillion stashed abroad. Only 2% of offshore declared assets were invested in government securities.
However, people preferred keeping their money abroad and only had it regularised.
The last domestic assets scheme was availed by 76,907 people and an amount of Rs1.5 trillion was declared. Nearly one-third of these assets were in the shape of cash and prize bonds.
The Federal Board of Revenue (FBR) has advised Prime Minister Imran Khan to take the judiciary and political leadership into confidence for the success of the Pakistan Tehreek-e-Insaf (PTI) government's upcoming tax amnesty scheme.
The tax authority has also requested the prime minister to mitigate any objections the Financial Action Task Force (FATF) and International Monetary Fund (IMF) could raise over the scheme before it was launched.
If Finance Minister Asad Umar secures the IMF's nod next week, the scheme may be announced on April 15.
All companies and individuals would be entitled to avail the scheme except public office-holders and their relatives. The condition applies to those who have been in office since January 2000.
The FBR put forward the advice in its first presentation to the prime minister on Friday. Khan endorsed the scheme in principle, but asked the finance ministry to make it more stringent.
PML-N slams PTI govt’s U-turn on tax amnesty scheme
Sources in the FBR said the judiciary must be taken into confidence for the success of the scheme. Similarly, the entire political leadership needs to own it to make it work.
Corruption proceeds cannot be legalised under the scheme. However, but it is unclear as to who would determine whether or not the money declared was the proceeds of corrupt practices.
The Pakistan Muslim League-Nawaz's (PML-N) government's last comprehensive offshore and domestic assets tax amnesty scheme faced headwinds at the start because of a case in the Supreme Court. The government had to give a one-month extension to provide more time to people.
The current government's tax amnesty scheme would be available to the owners of Benami assets. Those who have hidden sales proceeds in the past would also be allowed to avail it. The revision of balance sheets by companies would be permitted and litigation cases allowed to be settled.
Ill-gotten wealth acquired as of June 2018 could be legalised under the scheme.
The government is considering regularising only those foreign assets that would be converted into money and remitted in the form of rupees to Pakistani banks or deposited into the declarant's own foreign currency bank account in the country.
The sources said the government would offer the scheme on Benami assets, foreign liquid assets repatriated to Pakistan, credit entries into own bank accounts, credit entries into Benami bank accounts and all types of other assets. The FBR had proposed 1% to 10% tax rates for regularising these assets.
However, the political leadership did not accept these rates and asked the government to increase them significantly to address moral-hazard objections. Tax amnesty schemes are taken as a source of discouragement for those who file their returns and pay their taxes.
The FBR wants that own-account credit entries should be allowed to be declared at only 1% of the total credit entries from July 2013 to June 2018 or 10% of the peak credit entries, whichever is higher.
For Benami credit entries, the FBR has recommended a 2% rate of the total credit entries from January 2017 to April 2019 or 10% of the peak credit entries.
The FBR has proposed a 10% rate for Benami assets, but the political leadership wants it to be increased to 25%.
For the repatriation of liquid assets to Pakistan, the FBR only wants a 5% rate, which is expected to be increased after input from the prime minister.
The premier is opposed to the idea of allowing offshore assets to be declared under his government's first tax amnesty scheme. However, the finance ministry wants that at least those assets that can be repatriated to Pakistan should be allowed, the sources said.
Many people have kept their foreign assets in trusts. A proposal has been floated that their trustees should be permitted to avail the scheme. These trustees are often banks. In certain trusts, beneficiaries are not defined. To address the problem, the government will have to allow declaring trusts at a certain percentage. The repatriation of trusts is not possible.
The tax authority wants that the declaration of open plots, apartments and land be allowed at the acquisition cost or the FBR values on April 15 this year.
The scheme may also allow declaration of vehicles at their original registration cost.
Gold could be declared at Rs5,000 per gram value. The maximum value of the gold that can be declared under the scheme may not be more than Rs5 million.
The sources said unlike the last tax amnesty scheme, the filing of income tax returns or the revision of the last tax return would be mandatory.
Similarly, those declaring hidden sales would also have to file their sales tax returns. They would need to declare the last five years' undisclosed sales and payments of 3% sales tax and federal excise duty.
The black money declared under the scheme would have to be deposited in a bank account and the balance retained till June 30.
Those availing the scheme would have to withdraw their tax appeals and writs filed in courts. Cases pending before a court would be excluded from the amnesty scheme, except old ones.
Last amnesty scheme
Around 6,195 individuals had availed the offshore tax amnesty scheme launched by former prime minister Shahid Khaqan Abbasi in 2018. They legalised assets worth Rs1.1 trillion stashed abroad. Only 2% of offshore declared assets were invested in government securities.
However, people preferred keeping their money abroad and only had it regularised.
The last domestic assets scheme was availed by 76,907 people and an amount of Rs1.5 trillion was declared. Nearly one-third of these assets were in the shape of cash and prize bonds.