With doubtful projections, FBR clears tax amnesty schemes

Revenue board aims to collect more than Rs150b through the schemes.

ISLAMABAD: The highest decision-making body of the Federal Board of Revenue (FBR) cleared on Wednesday the tax amnesty schemes aimed at doubling the tax net besides fetching significant revenues at a time when taxmen are struggling to meet targets.

The green signal was given here on Wednesday in a meeting of the Board-in-Council, headed by FBR Chairman Ali Arshad Hakeem.

However, sources told The Express Tribune that some members of the board termed the schemes a ‘Financial NRO’ and cast doubt over revenue collection projections.

In the infamous National Reconciliation Ordinance (NRO), issued by former president Pervez Musharraf, the government closed scores of criminal and corruption cases. However, the Supreme Court declared all actions taken by Musharraf illegal and many references, including the NRO, were sent to parliament for consideration.

In this case too, the government is likely to issue an ordinance to launch the amnesty schemes. Before that, the sources said, the matter would be sent to the law ministry for vetting.

According to the sources, FBR’s legal wizard Aqil Usman pointed to legal lacunas in the proposed draft, prompting the chairman to issue directives to sort out these. The legal issues can delay the schemes, which the FBR planned to launch from October 1.

They added some of the members were not enthusiastic about the success of the schemes as such programmes in the past had failed to get results.

In the board meeting, Member Inland Revenue Policy Asrar Raouf argued that out of the population of 180 million, only 3.4 million people had national tax numbers. Of them, only 1.5 million file returns, including 900,000 from the salaried class.

Proposed schemes

The FBR has planned a three to four-year Tax Registration Scheme, which will ask people to comply with tax laws, get national tax numbers and start paying taxes by filing returns. Taxpayers will deposit about Rs39,000 in the first year, Rs49,000 in the second year and Rs59,000 in the third year.

In the scheme, 3.8 million people will be targeted who have been identified by using database of National Database and Registration Authority (NADRA).

In another scheme called Tax Investment Scheme, people will be asked to declare their assets by paying tax in the range of 1% to 1.5%. Both existing and new taxpayers will be able to accept this one-off offer, which will expire in three months. The sources pointed out that there would be no discrimination between foreign and local assets in the scheme.

FBR officials believed that revenues from these schemes would range from Rs152 billion to Rs176 billion. However, some board members raised questions over such high expectations.

According to the sources, after the expiry of assets declaration scheme, the government will announce a scheme for whistle-blowers next year with an incentive for the informants, who will get 40% of the tax collected.

Talking to The Express Tribune, FBR Chairman Ali Arshad Hakeem said “instead of witch-hunting, the government wants to give an opportunity to the people to come into the tax net.”

When asked about moral hazards of the amnesty schemes, he said the country would have to make a choice for the time being between principles and immediate financial needs.

“The country needs liquidity to function smoothly and for that the schemes are being worked out,” he said, adding if someone had wealth abroad it was not his personal wealth, but of the state.

He said tax rates were not being kept high as these would be competitive with the rate for remittances, which is 2% of the transaction. He added three types of people could benefit from the schemes – fresh entrants, NTN holders but non-filers and taxpayers who do not regularly file returns.

Published in The Express Tribune, September 27^th, 2012.