The economic debt trap is one of the biggest challenges to a prosperous, stable and progressive Pakistan. The problem is bound to grow as the revenue collection is not expected to increase while the debt may reach unmanageable levels.
The government recently introduced the Asset Declaration Ordinance, 2019, which was meant to address the growing debt and any shortcomings caused by the previous year’s amnesty scheme. Let us first analyse how the present amnesty scheme is different and the shortcomings that have been repeated in it. In the past, similar schemes offered tax amnesty on declaring hidden ‘indigenous’ property, or undeclared local assets. This year’s scheme is no different, hence the question: why would people seek amnesty now, when they did not do so in the past?
The entire focus of the present amnesty scheme is on unearthing ‘property’ or ‘fixed assets’. While the scheme makes some efforts in uncovering concealed income, sales tax, and other heads, it is neither attractive nor convincing enough for someone to declare hidden wealth. The Amnesty 2019 focuses on hidden assets which are concealed mostly under a Benami arrangement i.e. hiding an asset or property under someone else’s name. Those familiar with tax laws would know that hidden sales tax is a much bigger prize in terms of volume and value. Then why is collecting taxes from undeclared hidden assets the only focus instead of these heads, especially when similar schemes in the past have not been successful?
There are also some inconsistencies within the scheme which would discourage people from availing it. According to industry experts, the government possesses a list of Benami account holders who will be investigated once the scheme is over. This can cause panic amongst banks and the business community, and may create a negative perception of the new scheme.
Furthermore, the incentive or immunity provided upon disclosure is not valuable enough for disclosure. The declarant must be given sufficient time to evaluate the contents of the scheme. The scheme is only valid till 30th June, 2019, which begs the question: why such a hurry? Moreover, everyone other than office holders i.e. someone who held the position of a public office from 2000 to 2018 can avail this scheme.
Lastly, while the current amnesty claims to offer immunity against all laws including income tax, sales tax and custom laws, it does not offer any immunity against NAB or anti-corruption laws. Due to this, certain politicians, businessmen and government servants will not be interested at all. This is in contrast to the 2018 scheme which offered immunity against NAB and anti-corruption laws.
Another anomaly in the amnesty scheme is regarding the price of the property falling under hidden assets. The rates at which the properties will be assessed under the scheme were revised through an SRO 120(1) to 121(1), 2019, which was issued in February this year. According to this, the FBR has revised, and in most cases, enhanced the property prices by many times, meaning that when amnesty will be offered on these properties, it would be on a value much higher than the original. This makes one question the logic behind this scheme, as one incentive is completely replaced by another.
The scheme has been drafted in good faith and is commendable. However, it is incomplete and may fall short of fixing the bigger problem, which is revenue collection, debt servicing, and increasing the tax net.
Published in The Express Tribune, June 22nd, 2019.
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