A first by the incumbent PTI government, another tax amnesty scheme has been introduced for whitening of undisclosed assets, including those in foreign countries, at nominal tax rates. The scheme has come into effect through a presidential ordinance to continue till June 30 this year i.e. for a period of 45 days. Such schemes are not new to Pakistan and have been used by governments in the past for increasing revenues and improving tax compliance. The previous government, led by the PML-N, had floated two money-whitening schemes in years 2016 and 2018. History, however, shows that none of such schemes in the past have met with much success.
Offering tax amnesty, under a policy decision, is considered controversial as it weakens the morale of honest taxpayers, besides affecting tax compliance by people who find it more convenient to wait for a scheme rather than pay the tax in time. However, the incumbent government claims that a few different features as well as the stick accompanying the carrot will help it achieve the desired results.
According to Dr Abdul Hafeez Shaikh, the PM’s Adviser on Finance, Revenue and Economic Affairs, the condition that money to be declared will have to be deposited in bank is something that differentiates the current amnesty scheme from those in the past, as it will — besides generating revenue — help document the economy and make dead assets functional. With those declaring assets required to become tax filers will serve to broaden the tax net, as expected by the government.
An exclusion clause in the scheme is there to ensure that it does not run into conflict with legalities, as proceeds from crime, corruption and kickbacks as well as laundered money cannot be whitened under the scheme; and public office holders and their relatives are not qualified to avail of the scheme. The stick of imprisonment and forfeiture — said to be missing previously — in case of failure to declare assets beyond June 30 is expected to work towards the success of the scheme. Let’s hope the PTI government’s first amnesty scheme proves to be the country’s last and is followed by the law taking its course, as promised.
Published in The Express Tribune, May 16th, 2019.