By Shahbaz Rana
Published: December 29, 2016
ISLAMABAD: Giving the amnesty scheme to only the realty sector is discriminatory and the government should extend similar benefits to all sectors of the economy, particularly the industrial sector, recommended the Senate Standing Committee on Finance and Revenue. Govt mulls tax amnesty to lure foreign wealth backRecently, the government extended a blanket tax amnesty scheme for the realty sector, offering stakeholders to whiten money by paying a nominal 3% tax as compared to the standard 35% income tax rate.
A senate panel on Wednesday proposed the government to offer a general tax amnesty scheme along the lines of the one offered to the real estate sector, lending its support to tax authorities that are already in the process of crafting a scheme for the benefit of ‘all’.
The move was widely criticised and comes despite government’s efforts, and claims, to increase tax revenue. Pakistan currently suffers from fiscal constraints with one of the lowest tax-to-GDP ratios in the world.
The results of the realty sector scheme, which is the third by the present government, have also been somewhat disappointing. So far, 1,919 people have availed the scheme and declared Rs1.4 billion worth of properties, said Rehmatullah Wazir, Member Inland Revenue Policy of the Federal Board of Revenue (FBR). He said these people paid Rs50.1 million in taxes to the FBR.
“Had the scheme been offered to all sectors, it would have been well received by the people,” said Senator Saleem Mandviwalla, chairman of the standing committee. He said the committee feels that the government should offer a similar scheme to all sectors of the economy.
Mandviwalla asked the FBR to make a proposal about a general tax amnesty scheme and share it with the standing committee.
It is highly likely that the government will use the shoulders of the Senate standing committee, as it did while giving the amnesty scheme to the realty sector. The government used the name of the National Assembly Standing Committee on Finance as it looked to justify the realty sector amnesty scheme to the general public.
The government is already in the process of finalising a general tax amnesty scheme to attract money stashed in Pakistan and abroad by its citizens. The increasing requirements of disclosures in offshore havens have made it difficult to retain untaxed and hidden assets abroad.
According to the preliminary proposal, the government may offer to disclose hidden wealth stashed in Pakistan by paying a 5% rate during the first month, 7.5% in the second month and 10% for the third and fourth month. In order to attract foreign assets, the government may set 2.5% rate for the first month, 4% for the second and 5% for the last two months, they added. However, these rates are not final yet.
According to some estimates, Pakistanis have about $100 billion to $120 billion worth of assets abroad, although Finance Minister Ishaq Dar had once quoted a $200 billion figure. Even 5% of this amount would significantly lessen the government’s fiscal woes.
The PML-N government had also offered a tax amnesty scheme to the retailers, which also failed miserably. Less than 10,000 people had availed the retailers’ scheme against the claim of one million people. However, Senator Osman Saifullah of the PPP observed that unlike the scheme offered to the realty sector, the amnesties should be time-bound otherwise the government will not be able to achieve its intended purpose. Senator Saifullah also suggested that the federal government should enhance the deputy collector-determined property valuation rates to the extent of Islamabad Capital Territory.
He said that the fair property valuation rates would address the issue of discrepancy between the market rates and the rates at which people pay taxes on the property transactions.
Senator Mohsin Aziz of the PTI said that the standing committee was discussing contradictory economic policies. At one hand it is proposing general tax amnesty scheme and on the other hand it will discuss the Benami Transactions Prohibition Bill. However, Senator Aziz too, sought tax amnesty scheme for the industrial sector.
Prime Minister Nawaz Sharif had given an amnesty scheme to the industry in 2013, which is called Greenfield Investment scheme, said Finance Secretary Dr Waqar Masood. The FBR officials said that this Greenfield scheme has now been extended till 2019.
Published in The Express Tribune, December 29th, 2016.