ISLAMABAD: The Pakistan Tehreek-i-Insaf (PTI) government has almost finalised its first tax amnesty scheme to provide people with the means to legitimise all kinds of offshore and onshore undeclared assets at the rates of five to 10 per cent.

Prime Minister Imran Khan would approve the new tax amnesty scheme on Monday, claimed a senior finance division official while speaking to Dawn. “After prime minister’s formal approval, a summary will be sent to the cabinet for approval,” he added.

The next cabinet meeting scheduled for April 16 is expected to take up the summary.

This move coincides with the implementation of the Benami Act in March 2019 in line with its efforts to document the economy — allowing tax officials to confiscate whole properties, expensive vehicles and bank accounts registered with fictitious individuals.

The new tax amnesty scheme also coincides with a new global anti-tax evasion scheme that is operational under a multilateral tax convention on the avoidance of double taxation and recommendations of Financial Action Task Force (FATF).

Plan covering all kinds of offshore, onshore undeclared assets to be presented before PM for approval tomorrow

Finance Minister Asad Umar told Dawn that the scheme was being designed in a fashion to document the economy. “We have several representations from all quarters, asking for one-time relaxation for those who have not declared their assets,” he said.

The minister also said the government had done its homework for a crackdown on those who were not filing tax returns and those who did not exist on the tax roll. “We have sufficient data now regarding all such people from various sources,” the minister said, adding the crackdown would be launched a day after the scheme would end.

“I am confident that more people will come under the tax net now,” he said, adding his government had received returns of 1.8 million this year. In the next two years, the target was to take this number up to five million.

In the past five years, the PML-N government had offered four tax amnesty schemes to people. The last amnesty scheme of the PML-N government was designed in a fashion to encourage people only to declare their assets but avoided documentation.

Proposed scheme

The new scheme has four main pillars — slabs, coverage of assets, exemption and filing of tax returns.

Official sources privy to the development told Dawn that the government had almost finalised the draft law of amnesty with broad contour to be implemented by April 16. “We are considering whether the scheme will be implemented through a presidential ordinance or laid before the parliament for implementation,” the sources said.

The most likely decision is to implement the scheme through a presidential ordinance, said one source while explaining that the passage of a money bill from the parliament could take several days. Moreover, people also want the scheme at the earliest as delays may lead to uncertainty.

“We are short of time and have limited available space to implement the scheme,” the source said, adding that previous governments also introduced amnesty schemes through presidential orders.

IMF programme

The government wanted to offer the amnesty scheme to people before going into the IMF programme. “The IMF is not in favour of any amnesty scheme,” a senior tax official told Dawn.

“We will share the scheme with the IMF after cabinet approval to apprise them by giving last chance to those people who have not declared their assets,” the official said.

Pakistan will also get clearance of the tax amnesty scheme from the FATF, currently reviewing Pakistan’s legislation and administration from the perspective of anti-money laundering and terror financing.

Under the proposed scheme, the government will offer three slabs for declaring all kinds of assets, both offshore and onshore.

The proposed slabs were 5pc, 7.5pc and 10pc for whitening of the assets though they could be changed before cabinet approval, the source said.

Moreover, the rates will also vary in cases of repatriation of assets to Pakistan and in cases of non-repatriation of foreign assets. However, it is not yet clear whether the government would link the scheme with the repatriation of wealth.

In the last scheme, the link was not made with repatriation of assets. “This issue is seriously under consideration whether to link it or not,” the official said.

The scope of the scheme was expanded this time with inclusion of all kinds of movable, immovable assets, tangible and intangible and bank accounts. “We will extend the scope of the scheme to mandated bank accounts as well,” the official said.

Official estimates 20pc to 40pc of total bank accounts in the country are mandated. “We have already made amendments in Section 165A of the income tax ordinance to ask banks about the mandated bank accounts details,” an official said.

Similarly, the benami properties, bank accounts, undeclared duty paid vehicles and jewellery will also be covered in the proposed scheme.

Bar on public office holders

Under the proposed scheme, the government will bar all those holding any public office since the year 2000 from availing the tax amnesty scheme in an attempt to address concern that former heads of government and state can avail the assets whitening package. The scheme is not meant to offer amnesty to public office holders who have pile up money through corruption and other illegal means.

In the last scheme, the limit was fixed for the year 2008.

One major deviation from past schemes proposed in the new amnesty package is that the names of individuals who will whiten their money will now be mandatory to file their tax return. However, these people will only be given one-time complete immunity from tax authorities under income tax law.

It is not clear whether other probing authorities, such as the Federal Investigation Agency (FIA) and the National Accountability Bureau (NAB) will also be bared to investigate cases of such people in future or not.

In the last scheme, complete exemption was given from all probing agencies and there was also no provision for people to file their tax returns. “We have seen that most of the people who availed the previous amnesty scheme even did not have NTNs,” a tax official said.

As that scheme was protected through an act of parliament, no tax official could touch the data of all those people who had availed the previous opportunity.

The FBR estimates it will be able to generate between Rs300 billion and Rs400 billion through the amnesty scheme, a claim which is not substantiated because the past scheme shows poor compliance in terms of documentation and raising tax on untaxed money.

They further suggest that the tax statutory period of five years for probing past cases should be abolished and the penalty of non-disclosure after the amnesty is announced be raised to 300pc along with five years of imprisonment. In cases of outflows, the disclosure of source should be made mandatory. “We will also effectively implement the income tax law by even sending tax evaders behind the bars from July 2019,” the tax official said.

Otherwise, the fate of this amnesty will be no different from that of the past ones. In the 1958 amnesty scheme, Rs1.12bn was recovered from undeclared assets, followed by Rs920m in 1968, Rs1.5bn in 1976, Rs10bn in 2000 and Rs3.16bn in 2008 and more than Rs100bn in 2018.

Several other schemes were also offered in 1985, 1991, 1998, 2012 and 2016, but the FBR did not disclose their revenue recovery or beneficiaries.

Published in Dawn, April 7th, 2019