Notwithstanding the history of tax amnesty schemes which is replete with failures, PTI government has announced the scheme of domestic and offshore assets declaration with a deadline expiring on 30th June. Under the scheme the assets acquired with black money and held within the country and abroad can be regularized and mad part of legal economy on payment of 4 percent tax on their assessed value. The value will be considered 1.5 times more than the FBR assigned value. After the payment of tax the whitened money will have to be brought to the country and be kept in banks. The people who want to keep money abroad tax at the rate of 6 percent will be charged. Giving a rationale behind the tax amnesty scheme, finance advisor argued that the scheme is not aimed at generating revenue but to document the economy and bring dead assets into the economy and make them functional.
Independent economists are not supportive of tax amnesty scheme and they are of the view that it will not expand the size of legal economy. In their point of view suchlike schemes rather enlarge the size of parallel economy because tax evaders will acquire assets and wait for the tax amnesty scheme to whiten their ill gotten assets at the nominal rate of interest.
Pakistan has seen mixed outcomes from tax amnesty schemes that have been announced so far. In 1958 under the military government of Field Marshall Ayub Khan the first tax amnesty scheme brought 71,289 people into the tax net.. The new taxpayers declared Rs. 1.3 billion in assets. In 1969 General Yahya Khan Tax amnesty scheme could add 19600 taxpayers with declared assets of Rs.920 million. In 1976 under the elected government of Zulfiqar Ali Bhutto the number of people declaring assets significantly declined and properties worth Rs. 270 million were declared. In 1986 the farcical whitener bonds scheme of visionary Dr. MahboobulHaq in General Zia government met with little or no success. In 1997 the Nawaz Sharif government tax amnesty scheme could add assets of Rs. 141 million. In 2000 military led technocrats’ government of General Musharraf launched a vigorous campaign for the documentation of economy which was a right step but it fall prey to the rigidity of tax machinery, coercive and corrupt practices of tax collectors. Nevertheless it resulted in assets declaration of worth $3 billion. In three tax amnesty schemes of previous PML- government only 128 people declared their assets. The timeline of tax amnesty scheme shows that in two non-elected governments the scheme produced relatively encouraging results but in all oligarchic elected governments it did not achieve the apparently intended objectives.
Finance advisor in his media briefing told that the main objective of the present government assets declaration scheme is to encourage documentation of economy. It is correct that the government is keen to bring the 40 percent informal economy under the tax net with the cooperation of trade bodies. As a trust building measure FBR Chairman has issued directives to all field formations prohibiting the attachment of bank accounts of business without prior approval from the office of chairman. However, documentation of informal economy is more complicated. Bulk of the goods from Afghan Transit Trade finds their way to the markets of Pakistan for wholesale and retail trade. This leakage has to be plugged. The economy annually suffers a colossal loss of Rs.450 billion because of smuggling and another Rs. 200 billion on account of under-invoicing in foreign trade. The government has not shown the resolve to evolve an effective mechanism of close assistance and coordination between different ministries and departments to effectively curb the twin menace of smuggling and under-invoicing.
