Prime Minister orders assessment of global reaction to tax amnesty plan
By: Mubarak Zeb Khan
ISLAMABAD: Prime Minister Raja Pervez Ashraf has asked the architects of tax amnesty scheme to discuss it with officials of the finance ministry to assess its international implications, sources told Dawn on Thursday.
Reviewing salient features of the scheme at a meeting with top tax officials at the FBR headquarters here on Thursday, he suggested that the finance ministry should screen the amnesty scheme in its true perspective so that no one could raise finger at the international level, referring to a possible whitening of money raised through drugs, etc.
The prime minister is visiting various government departments as part of his programme to review their working and performance. The FBR has proposed blanket exemption schemes which will allow tax evaders to pay Rs100 and legalise cash worth Rs10 million. The scheme is for those who are on tax roll but did not file returns for a few years.
The amnesty scheme will exempt tax evaders from investigation by the National Accountability Bureau and the Federal Investigation Agency about their sources of income even if the money is earned through terrorism, kidnapping for ransom, narcotics trade, extortion, etc.
Sources said the prime minister was concerned about FBR’s proposal of blanket exemption and asked the finance ministry to evaluate it.
Under the proposed scheme, those who have never filed any income tax return with the tax department can pay Rs39,000 only in October to whiten money or assets worth up to Rs10 million. For another Rs10 million worth tax/assets, a tax evader will have to pay one per cent (Rs100,000) in taxes. The one-time facility can be availed by the non-filers on payment of Rs49,000 in November and Rs59,000 in December.
Under the voluntary declaration of asset scheme, one per cent tax on the value of both non-transferable and transferable assets can be paid until Oct 31, 1.25 per cent between Nov 1 and 30 and 1.5 per cent between Dec 1 to 31. The scheme will be applied on assets in the country and abroad.
A tax official privy to the meeting said there was no need for such schemes because the FBR possessed all information regarding the assets of tax evaders. There was a need for strengthening enforcement of tax laws, he said.
He said the amnesty scheme would not help in documentation of the economy and would instead distort it if the FBR did not improve its enforcement.
An official statement quoted the prime minister as saying that paying government taxes and dues was a duty of every Pakistani and those who paid their dues regularly must be given respect for discharging their national obligations.
He directed the FBR to put extra efforts and intensify its campaign for promoting tax culture. “We have to convince the people that it is beneficial to declare their assets rather than hide them,” he said.
“The tax system should be judicious and people should not be taxed beyond their capacity,” the prime minister emphasised.
Expressing concern over the low tax-to-GDP ratio (9.1 per cent), Mr Ashraf urged FBR officials to come out with an out-of-box solution to broaden the tax base. “Our
tax-to-GDP ratio is low even by regional standards,” he observed, lamenting that the number of taxpayers had not kept pace with growth of population.
Terming the role of FBR critical, the prime minister said collection of revenue was necessary for running affairs of the state and financing development schemes.
“Tax collection is an uphill task, especially when no one is ready to pay taxes,” he remarked.
Mr Ashraf said progress and prosperity were directly linked to efficiency and performance of FBR. If the FBR succeeded in collecting taxes, the government would have the space to allocate adequate funds for providing basic amenities, infrastructure development and work for people’s welfare.
The prime minister said Pakistan’s economy had been under intense pressure because of internal and external factors. Emphasising the need for generating more taxes, he said sovereignty was intrinsically linked to a country’s financial health.
Finance Minister Dr Hafeez Shaikh informed the prime minister that the FBR had managed to collect Rs350 billion more as compared to previous year and the government had managed to make savings as a result of cost controls by spending Rs186 billion instead of Rs215 billion.
He said no borrowing was made from the State Bank. Instead, an amount of Rs915.4 billion was returned to the SBP. The minister said the stock exchange had touched a record high of 15,712 points with an average return of 35 per cent per annum.