Imran Khan-led cabinet approves Asset Declaration Scheme

Asset Declaration Scheme offers all Pakistanis opportunity to legalise hidden assets at 4% tax by June 30

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The federal cabinet on Tuesday approved the 'Asset Declaration Scheme', providing one more opportunity to all Pakistani citizens to declare and legalise undisclosed assets in and outside the country by paying just 4% taxes on all assets other than real estate.

Briefing the media about the cabinet decisions, Special Assistant to Prime Minister on Information and Broadcasting Dr Firdous Ashiq Awan said the ordinance for declaration of assets would be issued by the president as part of the government's efforts to document the economy and generate taxes from the privileged sections of society.

Explaining the scheme at the same press conference, Adviser to Prime Minister on Finance Dr Abdul Hafeez Shaikh said the scheme would be applicable till June 30 and all Pakistani citizens, other than those holding public offices or their dependents, would be able to benefit from it.

The government's top financial adviser said that the federal cabinet has approved the amnesty scheme to whiten the black money, adding that this scheme will not be applicable to salaries but only on the expenditures and properties. He stressed that the new scheme is aimed at documentation of the economy.

"The basic purpose of the scheme is not to generate revenue but to document the economy and make dead assets functional," Dr Shaikh told reporters.

"The philosophy behind the scheme is to encourage businessmen to participate in the legal economy, he added. "It is not intended to intimidate people."

Shaikh said efforts were made to make the scheme easy to understand and implement. "All assets are included in the scheme, inside or outside Pakistan. All assets other than real estate, would have to pay 4% to get these legalised, Dr Shaikh said.

"In case of real estate, it would be evaluated at 1.5 on FBR [Federal Board of Revenue] value, to bring it to market value," he added, citing an example that if the FBR value of any property was Rs1 million, it would be charged at the value of Rs1.5 million.

The Pakistanis abroad can also pay 4% to legalise their undisclosed assets, he said, adding; however, that in terms of cash, they will have to deposit their money in Pakistani banks – in local or foreign currency – otherwise, they will have to pay 6% to legalise their assets.

Responding to a question, Dr Sheikh said talks with the International Monetary Fund (IMF) had been under way for the past eight months. "A staff-level agreement has been signed with the IMF and after the agreement, the IMF board will approve a programme for Pakistan," he added.

He defended the IMF conditions, saying those were in the interest of Pakistan. "The demands of the IMF to reduce debt and expenditures, increase revenues and bring improvement in the debt system are also in the interest of Pakistan," said the adviser.

Sheikh stressed that approaching the IMF was not something new. "Those (opposition) taunting us for approaching the IMF have themselves approached the institute earlier," he said, adding that the basic flaws of the economy needed to be addressed to get rid of the IMF forever.

"As far as the question of the latest programme being the last is concerned, some things have been wrong since the start and they were not addressed. The IMF is asking for addressing basic flaws," he said, pointing to stagnant exports, lack of foreign investment and revenue mobilisation.

To avoid the IMF permanently, the adviser said, these flaws would have to be rectified. "If these flaws are not addressed then there will be the need to approach the IMF." In the past some improvement was noticed for a short period of time but afterwards issues rose again, he added.

On the occasion, Dr Awan added that if fiscal discipline was maintained, there would be no need for any package from IMF. "The commitment of the team of Prime Minister Imran Khan is to keep financial discipline, maintain a regulatory mechanism and take the economy towards documentation."

At the press conference, Dr Sheikh hinted at further increase in the prices of gas and electricity but stressed that the burden would not be passed on to the poor. "If electricity tariff has to be increased it will not impact consumers who use less than 300 units – 75% of the total users," he said, adding that the same formula goes for the gas consumers.

When asked about the development budget for the next financial year, Dr Hafeez Shaikh said that the Public Sector Development Programme (PSDP) will be increased to Rs700 to 800 billion. He informed that Rs180 billion will be allocated for social safety programmes under the Benazir Income Support Programme and Ehsas programme.

Sheikh admitted that the performance of the Federal Board of Revenue (FBR) was less than expectation, adding that many decisions were being taken to enhance its performance in the next financial year. Sheikh told reporters that the new chairman of the FBR, Shabbar Zaidi, had been mandated to provide facilities to tax payers.

"But if the rich still do not pay taxes, strict action be taken," Dr Shaikh said. Recently law on Benami assets had been passed according to which if such assets were not declared, they might be confiscated, he said, adding: "This is why all facilities are being given to make these assets white.

State Minister for Revenues, Hammad Azhar, who was also present at the press conference, told reporters that the amnesty scheme launched last year did not have the condition of being a tax filer. "Those who want to avail this scheme will have to be tax filers," he said, adding: "The tax amnesty scheme deadline will not be extended."

Awan said that the cabinet meeting, chaired by Prime Minister Khan discussed an 18-point agenda. the meeting renewed the licence of Pakistan International Airlines (PIA), approved board of directors of Pakistan Tourism Development Corporation (PTDC), ratified Pakistan's trade agreement with Algeria and approved exemptions for assets belonging to institutions of the Benevolent Fund and Group Insurance.

She said that the cabinet was briefed about the consumer price index (CPI) and it was decided that action would be intensified against marketers and profiteers and availability of 19 essential items at Utility Stores and Saasta bazaars would be ensured.

The ministers also considered the strategy to keep prices of items of daily use in check by curtailing role of middlemen through the system of magistrates and market price committees, she added. "Prime Minister Imran Khan instructed the industries minister and the Utility Stores Corporation (USC) chairman to show zero tolerance towards those involved in price hike," she added.

Responding to a question, Dr Awan said that media would be informed about the steps taken by the government to provide cheap and quality medicines by bringing reforms in Drug Regulatory Authority of Pakistan (DRAP). The cabinet was also informed about the financial assistance of Rs260 million by China for narcotics control measures.

The cabinet also discussed formulation of a proper mechanism to provide legal assistance to prisoners held in jails in other countries. Dr Awan said that Prime Minister Khan had arranged funds for the immediate repatriation of Pakistanis imprisoned in Malaysia.

She said that the attorney general informed the ministers about the international litigation, involving Pakistan. "Billions of rupees was spent on payments of fees to lawyers on international litigation in courts as the previous governments did not thought about national interest and about the repercussions of the agreements signed by them," she said.

In 2016, six cases involving Pakistan were pending in international courts but the number has now risen to 45 in 2019. The main cases included the proceedings of Reqo Dik, Karakey ship, Hyderabad fund, Kulbhushan Yadav and Samjotha Express train, she added.

In the last five years, lawyers were paid $100 million. Now $10 million is to be paid as legal fees this month and afterwards. She added that the prime minister has directed the ministries, which usually sign agreements at international level, to adopt a mechanism of legal consultation to look into all aspects to avoid problems in the future.