ISLAMABAD: Public response to the schemes has been positive on two tax amnesty schemes, i.e. Foreign Assets (Declaration and Repatriation) Ordinance, 2018 for undisclosed foreign assets and Voluntary Declaration of Domestic Assets Ordinance, 2018 for undisclosed income and domestic assets.
So far, 55,225 declarations have been filed in which declared value of foreign assets is around Rs577 billion and that of domestic assets is around Rs1,192 billion.
Declarants have paid around Rs97 billion out of which around Rs36 billion have been collected on foreign assets and Rs61 billion on domestic assets. In addition, $40 million have been repatriated. This response to the amnesty schemes has been unprecedented. Amnesty scheme for foreign assets applies to both liquid and immovable assets such as bank accounts, shares and mortgaged properties. Tax rates range from 2% to 5%, depending on the type of asset.
Special tax rate of 2% is applicable to liquid assets which are repatriated into Pakistan. The amnesty scheme for domestic assets covers all types of assets and income, with tax rates of 2% and 5%. To protect declarants from any harassment, both schemes under Voluntary Declaration of Domestic Assets Act, 2018 and Foreign Assets (Declaration and Repatriation) Act, 2018 promulgated on 8th April 2018 which eventually was made part of Finance Act 2018 to ensure complete confidentiality of declarant’s information.
Moreover, such information cannot be used as evidence against declarants under any other law. Finance Minister is closely monitoring the operation of the amnesty schemes and constantly advising both the FBR and SBP for improving payment procedures and ensuring effective facilitation. As per directions of the Finance Minister, FBR has set-up helplines, which operate 24/7 with dedicated telephone lines and e-mails for quick response to queries.
FAQs, online user guide and all relevant documents have been published on FBR’s website (www.fbr.gov.pk) which is periodically updated on the basis of queries raised by intermediaries and declarants. Frequent interaction with private sector including accounting professionals and tax practitioner bodies has been helpful. (Continued Similar arrangements have been put in place in SBP.)
The online user guide provides step-by-step information regarding registration under the amnesty schemes, procedure for payment of tax and submission of declarations. Officers well versed with the features of the amnesty schemes have been assigned the task of responding to queries. There is also a fully functional IT support team which regularly monitors online IT system.
For payment of tax on foreign assets, State Bank of Pakistan has devised a procedure, whereby tax in USD is deposited into SBP’s account through wire transfer. Government has issued Government of Pakistan’s US Dollar Denominated Amnesty Rules, 2018, whereby SBP has been authorized to issue these bonds having a maturity period of five years and annual profit of 3% to be paid semi-annually.
According to the rules, citizens of Pakistan can invest in these bonds out of remittances declared under the foreign amnesty or through encashment of foreign currency accounts held in Pakistan. The low rates of the Amnesty Schemes ranging between 2% – 5% and is a major incentive for declaring undeclared assets and income. Pakistan has also become a signatory to the OECD Multilateral Convention which will provide access to information about offshore financial accounts of Pakistani residents from September 2018.
This will enhance the capacity of FBR due to access to offshore financial accounts of Pakistani residents held in the signatory countries. Necessary amendments have also been made in the Protection of Economic Reform (PERA) Act, 1992, to regulate FX movements and bring it in line with Income Tax Ordinance, 2001.
Moreover, amendments have been made in the Income Tax Ordinance, 2001, whereby FBR may inquire about the source of foreign remittance above Rs.10 million and limitation of five years to probe foreign assets and income has been removed.
Above all, revenues from the amnesty schemes will help in documentation of the economy as well as bring in onetime payment from non-declarant to officialise their assets. Equally critical is to support Pakistan in its endeavour, to reduce poverty and uplift its population which off-course depends on effective prioritization of development spending.