New rules have implications for Pakistani expats

Efforts should be made to minimise suffering for NRPs who provide remittances

KARACHI: The government has offered the asset declaration scheme in order to encourage tax dodgers to come into the tax net by paying taxes at sharply lower rates.
Meanwhile, the deadline for tax return filing is extended many times to attract non-filers, especially those who have been surviving so far behind the wall that divides society between filers and non-filers.
For the non-filer, the question of to be or not to be is getting more critical considering the fact that with more digitalisation and tighter connectivity, there are very few hiding places unless if you can still manage to slip your savings under the pillow or into your socks.
At the same time, the State Bank is tightening the screws on financial/foreign exchange transactions to comply with Financial Action Task Force (FATF) requirements for anti-money laundering (AML) and countering financing of terrorism (CFT).

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Newly appointed Federal Board of Revenue (FBR) Chairman Shabbar Zaidi has promised to undertake the long-awaited tax reforms that will broaden the tax base and facilitate the taxpayers. However, during the whole tightening drive, the FBR and State Bank have created some serious issues for the diaspora living abroad and referred to as non-resident Pakistanis (NRPs).
Let’s begin with the FBR, where, as per Section 81 of the Income Tax Ordinance 2001, anyone living 183 days or more outside Pakistan in a tax year is a non-resident and does not have to file tax return unless if he has some Pakistani source of income such as stock dividends, rental income of immovable property or disposal of any property or securities that may be subjected to capital gains tax.
So, it is possible that an NRP could be millionaire while living in a Gulf country and having properties and cash in bank accounts both inside or outside of Pakistan without any declaration to the FBR.
On the other hand, the NRPs who did file the returns for any of their income in Pakistan are worried about coping with eventual consequences of declaring their assets at any point in time in the future.
Let’s begin with the flurry of notices they might receive to explain how they built those assets which they never declared in the past for obvious reasons. How can any NRP deal with those summons and legal notices from abroad? Dealing with those eventualities from abroad such as arranging lawyers to reply to queries is a hassle.
Also, the rich and well-to-do NRPs, who have nothing to do with any financial corruption and/or money laundering, have genuine concerns about the FBR’s ability to fairly distinguish their hard-earned savings and investments from the proceeds of money laundering once their assets are shared with tax authorities in Pakistan under the Common Reporting Standard (CRS) framework.
Financial complications for the expats do not end with the FBR only as recently introduced restrictions by the State Bank on how any NRP can operate his or her account according to Chapter 8 of the Foreign Exchange (FE) Manual have added another challenge for the NRPs in managing their financial needs back in Pakistan.

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The regulation does not allow banks to provide Visa/Master Debit or Credit Card to any NRP, which is the most basic instrument used these days for day-to-day transactions. NRPs are only provided with a local ATM card, which is useless for them as they cannot use it abroad.
Also, few banks have blocked the online internet banking/transactions facility for the NRPs to comply with another requirement of the FE Manual, which requires them to submit Form A7 prior to any debit transaction on the NRP account, which is also not possible to comply with for any expat as it requires a visit to the bank branch.
While it is understandable that there are so many loopholes in the financial and taxation system that were supposed to be plugged long back, the efforts should be made to minimise the suffering for genuine and honest users of the system, especially the NRPs whose remittances are the backbone for financial stability of the country and any restriction or regulation that might discourage them should be revisited.