Tax amnesty: FBR pins its hopes on upcoming caretaker set-up

Money laundering fears delay the launch of schemes.

ISLAMABAD: Tax officers are pinning their hopes on the caretaker set-up to launch amnesty schemes to encourage around 3.8 million targeted people to declare their hidden assets as the finance ministry is reluctant to approve the proposal.

In a background briefing held here on Friday covering a range of issues, senior officials of the Federal Board of Revenue (FBR) said if the proposal could not sail through approval stages, the caretaker set-up may introduce these schemes. In the absence of the schemes that the officials did not describe as amnesty, the FBR would not be able to bring the identified 3.8 million people in the tax net, they added.

The PPP-led coalition government is going to complete its five-year term on March 18, 2013. Reports say the caretaker set-up may be installed by mid-January.

In the first scheme called the Tax Registration Enforcement Initiative Scheme, potential taxpayers will be asked to comply with tax laws, get national tax numbers and start paying taxes by filing returns. The taxpayers will deposit about Rs39,000 in the first month, Rs49,000 in the second month and Rs59,000 in the third month.

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

In the second scheme called the 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 avail this one-off offer, which will expire in three months.

Defending the lower tax rates, the FBR officials said people were sending their money abroad through various channels and bringing it back in the form of remittances by paying 2% tax, thus, to encourage them the tax rates under the amnesty schemes should be lower than the tax on remittances.

Initially, the FBR expected the schemes to generate revenues of Rs152 billion to Rs176 billion. However, on Friday the officials put the estimate at Rs96 billion.

The FBR officials did admit that the schemes had not been formally submitted to Finance Minister Dr Abdul Hafeez Shaikh for his nod. Shaikh was of the view that the schemes had not been sufficiently developed and formally presented to him.

According to the tax officials, the FBR will formally present the schemes to the finance ministry only when it is assured that the proposal will get his consent and the government has required support in parliament. They insisted they had not bypassed the finance ministry and could not do it under the government’s rules of business.

The finance ministry has shown reluctance because of fears that such schemes could lead to money laundering.

The International Monetary Fund (IMF) has also opposed the schemes and has instead asked the FBR to take action against the identified people instead of giving them a safe passage.

However, the tax officials insisted that the schemes were not aimed at providing an opportunity to the people to legalise their ill-gotten money in the last four and a half years. The FBR also told the IMF that capacity constraints prevented them from bringing 3.8 million people in the tax net in a year.

The taxmen said even if the government did not clear the schemes, the annual tax collection target of Rs2.381 trillion would not be revised. In the first four months (July-October) of the current fiscal year, the FBR has faced difficulties in meeting the target as it fell short by Rs64 billion.

Compared to the tax target of Rs611 billion for the four months, the FBR collected Rs547 billion, said the officials.

Published in The Express Tribune, November 3^rd, 2012.