Hit and miss: Amnesty scheme an abysmal failure, data shows

Only 3,000 people have so far availed PM’s initiative.

ISLAMABAD:

In yet another setback to the tax broadening drive, less than 3,000 people have so far availed the Prime Minister’s tax amnesty scheme and paid a meagre sum of Rs88 million, underscoring the deep-rooted tax evasion culture, according to figures compiled by tax authorities.

The response to the Nawaz Sharif’s blanket tax amnesty scheme was shared here on Tuesday with newly-constituted Tax Advisory Council (TAC), which held its maiden meeting in Federal Board of Revenue (TAC) Headquarter. The average tax paid by these people was just Rs29,480 per person. The figures are till the end of February.

After seeing the dismal outcome, the government has already announced a two-month extension in the amnesty scheme. The amnesty scheme was the second in a row that failed to yield desired results following the failure of earlier broadening of tax base drive through issuance of notices to the identified tax evaders.

According to FBR officials, only 2,600 dormant taxpayers filed income tax returns and paid a sum of Rs77.5 million. Sharif’s government had announced exemption from audit for those dormant taxpayers who file the last five year’s tax returns and pay a minimum of Rs20,000 in taxes. The carrot was that the government will not ask source of income – a policy that the International Monetary Fund (IMF) is not happy with.

The scheme has also offered similar incentives for new taxpayers. It asked any new taxpayer to file tax returns for the last five years along with a minimum of Rs25,000 per year in income tax. But the response was that less than 400 people came forward and paid a meagre sum of Rs10.6 million, according to officials who attended the meeting.

On Monday, the Executive Board of the IMF also aired concerns over the amnesty scheme.

“The December 2013 investment incentive package runs against the principles of equity and transparency in taxation,” according to a strongly worded press note issued by the IMF quoting its Deputy Managing Director, David Lipton.

Pakistan has one of the lowest tax-to-GDP ratio and its tax policy is heavily tilted in favour of the elites. The FBR collected Rs1.36 trillion in taxes in the first eight months of the fiscal year, which was just half of annual Parliament’s approved tax collection target of Rs2.475 trillion. Missing the budgetary target will keep the tax-to-GDP ratio miserably low.

The TAC members were also informed that response to filing of mandatory annual income tax returns was not so encouraging.

Representatives of the All Pakistan Tax Bars Association termed the outcome of the amnesty package discouraging. They urged the FBR to implement out-of-the-box solutions to broaden the tax base.

Most of the tax experts who attended the TAC meeting asked the government to enforce its writ to increase the tax base and refrain from giving tax amnesty schemes, according to the officials. Among the prominent people who attended the TAC meeting were S M Munir, Zakrya Usman of Federation of Chamber of Commerce and Industry, Yawar Ali who is an industrialist, Ashfaq Tola, a leading tax expert and Munwar Sheikh, President All Pakistan Tax Bar Association.

But the business representatives opined that at a time when the size of informal economy was larger than the formal economy the tax amnesty schemes were inevitable. Munwar Sheikh viewed that the regular taxpayers should be facilitated while the evaders should be burdened. Tola suggested out of box solutions and urged the FBR to get rid of presumptive tax regimes.

The FBR has asked the tax experts to bring concrete tax proposals within two weeks for improving tax base

Published in The Express Tribune, March 26^th, 2014.

Like Business on Facebook, follow @TribuneBiz on Twitter to stay informed and join in the conversation.