ISLAMABAD: The Pakistan Tehreek-i-Insaf government has announced its first tax amnesty scheme for whitening of undisclosed expenditures, sales and assets, including foreign assets, at nominal tax rates.
The scheme has come into effect through a presidential ordinance, which will offer a period of 45 days to people for declaration of their undeclared assets, expenditures, and sales along with payment of taxes until June 30 this year.
The scheme, approved by the federal cabinet during a meeting presided over by Prime Minister Imran Khan on Tuesday, has five main pillars — scope, default surcharge, exclusions, tax rates and conditions.
Unlike past scheme no revenue realisation projection is made on the plea that it is meant for allowing the grey economy’s inclusion in tax net.
The scheme can be availed by all companies, associations of persons and individuals only to whiten their assets, expenditures and sales not declared until June 30, 2018. There is no provision for whitening undeclared incomes both domestic and foreign.
The government has for the first time given another one-year time period to people for payment of taxes with additional different default surcharge rates on a quarterly basis until June 30, 2020. This facility will be available only to those people who will first declare their assets until June 30, 2019.
Under the scheme, assets within the country and abroad (except for real estate) can be whitened at a rate of four per cent. The whitened cash assets will have to be kept in Pakistani bank accounts. For people wanting to keep their whitened money abroad, a rate of 6pc will be charged.
For the declaration of real estate, its value will be considered 150pc of the FBR-assigned value to bring it on a par with the market rate. Similarly, the value of real estate will be considered 150pc of the DC value where the FBR value has not been notified or less than the DC rate. Moreover, under the current scheme, the persons are also allowed to enhance the declared value of immovable property.
The tax rate will be 1.5pc for whitening of domestic immovable properties (real estate). In case of foreign assets, the fair market value will be determined at the exchange rate prevalent on the date of declaration.
The tax rate on undisclosed sales or supplies is 2pc, which is also offered for the first time for bringing undeclared sales into the tax net. This will cover the sales or supplies chargeable to sales tax or federal excise duty, which has not been declared or has been under declared up to June 30, 2018.
The amount of tax will increase by a default surcharge of 10pc, 20pc, 30pc and 40pc for late payment of taxes. The tax rates will increase by 10pc if the tax is paid between June 30 and Sept 30, 2019. It will increase by 20pc in case of payment between Sept 30 and Dec 31, 2019. The tax rate will increase by 30pc in case of payment between Dec 31, 2019 and March 31, 2020, and further by 40pc in case of payment from March 31, 2019 onward till June 30, 2020.
The government is considering facilitating people to repatriate their assets in dollar as well as in Dirham through a UAE-based bank.
The scheme cannot be availed by the holders of public office including president, prime minister, chief ministers, governors, Chief Justice of Pakistan, judges, their spouses and dependent children and any public-listed or government-owned company. It will also not apply to gold and precious stones, bearer prize bonds, bearer securities, shares, certificates, bonds or any other bearer assets. The amnesty scheme is not available to any public office holder since May 15, 2009.
It will not apply to any proceeds or assets that are involved in or derived from the commission of a criminal offence. It will also not apply to proceedings pending in any court of law, among other exclusions.
There are a few conditions attached to the availing of the scheme. It is mandatory for the person availing the scheme to file income tax returns for the tax year 2018 or revised return, the financial statement and wealth statement.
Under the scheme, the cash declared will have to be deposited into a bank account. The foreign currency held in Pakistan may be deposited into the declarant’s bank account. The amount will be retained in the bank account till June 30, 2019.
Similarly, the foreign assets repatriated to Pakistan will be deposited into own bank Pak rupee account or his foreign currency bank account in Pakistan or invested in Pakistan Banao certificate or foreign currency-denominated bonds.
The foreign liquid assets not repatriated to Pakistan will be deposited in declarant’s foreign bank account on or before June 30, 2019.
The State Bank of Pakistan will notify the mode and manner of repatriation of assets to Pakistan, deposit of tax in foreign currency through SBP and method of conversion of values of assets held outside Pakistan in Pak rupees.
The assets declaration scheme was evolved on the request of representatives of the Karachi Chamber of Commerce and Industry who met Prime Minister Imran Khan on March 5, 2019. Since then, the premier asked former finance minister Asad Umar to devise a scheme.
The scheme made several modifications with a final one submitted to the cabinet on April 16. Soon after the appointment of new adviser on finance Dr Abdul Hafeez Shaikh the previous scheme was re-modified with drastic changes and submitted to the cabinet for approval on Tuesday.
Dr Shaikh briefed the media on the scheme. He was accompanied by Federal Board of Revenue Chairman Syed Shabbar Zaidi, Minister of State for Revenue Hammad Azhar and Special Assistant to the Prime Minister on Information Dr Firdous Ashiq Awan.
“We have tried to make this scheme very easy to understand and implement,” Dr Shaikh said at the news conference, adding that the scheme had realistic targets with low rates.
He claimed that the basic purpose of the scheme was not to generate revenue but to document the economy and to bring dead assets into the economy and make them functional.
The philosophy behind the plan is not to “intimidate” people but to encourage businessmen to participate in the legal economy, the adviser said.
Answering a question about how this scheme is different from the ones offered in the past, Mr Azhar said that unlike the past schemes, the one being introduced now made it mandatory for the people declaring assets to become tax filers. He said the scheme was not being offered to generate revenue and contained an option for businesspersons to revise their balance sheets.
In what Mr Azhar termed the rectification of a “major mistake” from the last amnesty scheme, people will now be required to deposit all of their cash in hand into the bank and declare it along with the deposit slip as proof.