PM Imran struggles to muster cabinet's support for tax amnesty scheme

Sources say key cabinet members consider certain provisions 'against PTI's core values'

ISLAMABAD: The majority of the federal cabinet members on Wednesday again opposed giving a tax amnesty scheme due to its clash with core values of the ruling party, but Prime Minister Imran Khan remained optimistic about the enforcement of his first money whitening scheme before the budget.

The federal cabinet met for the second time in less than 24 hours to approve the Pakistan Tehreek-e-Insaf's (PTI) first tax amnesty scheme, which also raised questions over the motives behind showing such an urgency to introducing the scheme. The meeting once again failed to develop consensus.

Sources in the federal cabinet told The Express Tribune that even the Ministry of Finance and Revenue did not wholeheartedly back the scheme that it itself had drafted. They said Federal Board of Revenue (FBR) Chairman Jehanzeb Khan and Minister of State for Revenue Hammad Azhar also did not forcefully defend the scheme.

The cabinet deliberated on all aspects of the proposed asset scheme and decided that certain provisions of the scheme need further fine-tuning, with the matter to be taken up at the next cabinet meeting, tweeted Information Minister Fawad Chaudhry on Wednesday.

On Tuesday, the information minister told the media that the prime minister had constituted a cabinet committee to further deliberate upon the proposed Assets Declaration Scheme.

But instead of holding a committee meeting, the prime minister called a full cabinet meeting.

The sources said the information minister, adviser to the prime minister on commerce, human rights minister and communications minister were among those who opposed the scheme. Some cabinet ministers, they added, neither expressed their support nor opposition to the scheme.

The sources said on Wednesday the debate largely revolved around two key questions.

The first was the possible political implications of going against the PTI's core values of fighting corrupt practices. Second, whether to give a stringent or a liberal tax amnesty scheme, if it was necessary to allow whitening of ill-gotten wealth.

In case of a stringent tax amnesty scheme, the FBR was of the view that hardly 30,000 people would avail it and that would be of no use. But this scheme can be politically defendable, the sources said.

In case of a liberal scheme, up to 500,000 people could come in the tax net but it will not be easy to defend the scheme before the general public and media, they added.

About 82,289 people had availed the last scheme of the Pakistan Muslim League-Nawaz (PML-N), resulting in the whitening of Rs2.5 trillion worth of assets in return for paying Rs124 billion in taxes.

The sources said the majority of the members who spoke on the issue were against the tax amnesty scheme. But the cabinet members also said they would defend the amnesty in public if that is what the premier desires.

Some cabinet members criticised the FBR for presenting a poor draft of the tax amnesty scheme. Upon this, the chairman FBR plainly said that the tax machinery had brought in the proposal on the direction of the government and it was not the FBR's policy initiative, the sources added.

So much so, Hammad Azhar also spoke against it and said that without public confidence and bringing in reforms in the FBR, the scheme cannot be successful, said the sources.

Azhar was not available for comments.

Before coming into power, the prime minister had termed tax amnesty schemes a cover-up of corrupt practices of the ruling elite.

The last PML-N government had given four tax amnesty schemes in its five-year term. At that time, Imran had announced that he would reverse the tax amnesty scheme of the PML-N tenure.

But on Wednesday, the sources said, it seemed the prime minister was trying to convince his cabinet members to support the scheme.

Now, the prime minister would individually meet the opponents of the scheme and will also hold consultations with the business community, they added.

Finance Minister Asad Umar and the FBR chairman largely gave clarifications sought by the cabinet members. They did not push the scheme hard.

The sources went on to say that the prime minister was of the view that the tax amnesty scheme will have to be introduced before the upcoming budget. Finance Minister Asad Umar had said that the budget will be announced on May 24.

It is unlikely that the next cabinet debate on the tax amnesty scheme will take place at least for ten days due to PM Khan's upcoming visits to Iran and China.

The sources said that the other issue before the cabinet was whether the scheme should be stringent with limited scope for participation and higher rates or there should be a liberal scheme that would allow maximum participation and low tax rates.

Nadeem Afzal Chan supported the idea of giving a liberal scheme and use it for signing a 'Charter of Economy' with the opposition parties.

The FBR Revenue proposed three options for setting the minimum and maximum rates for repatriation of offshore assets, disclosure of domestic assets and legalisation of benami assets, said the sources.

The FBR had proposed a minimum of 5 per cent, 10 per cent and a maximum 15 per cent rate for repatriation of offshore assets. For the declaration of domestic assets, it had proposed 10 per cent, 15 per cent and 20 per cent rates. For clearance of benami assets, the proposed rates were 15 per cent 20 per cent and 25 per cent.

The FBR proposed that all the public office holders, their children, spouses, brothers, and sisters should be ineligible for availing the scheme. In case of the liberal scheme, the relatives, bureaucrats and military personnel could be allowed to avail the scheme, the sources said.