Posted on

Extension in tax amnesty deadline

With a surge in interest in declaration of foreign and domestic asset, the government has extended the tax amnesty for one month with a cut of date of July31. A presidential ordinance has been issued in this regard. The deadline for filing amnesty declarations was June 30, however during last week, a large number of representations have been received from trade bodies, professional associations and general public and general public for extending the closing date due to short operational period after clearing legal and procedural challenges.

Meanwhile, the Federal Board of Revenue (FBR) has received confirmation that approximately Rs. 100 billion has been deposited in tax. However the actual amount that went into the national exchequer is Rs. 75 billion. When the tax amnesty scheme was announced, the Financial Action Task Force (FATF) had expressed reservations about it and said that the international watch-dog on anti-money laundering and counter terrorism financing had not been consulted. The articulate finance Minister DR. Shamshad Akhtar, who has recently attended the FATF meeting, may have also allayed the misgivings about tax amnesty scheme.

Initially the response to tax amnesty scheme was lackluster because of some procedural bottle-necks but of late it saw surge. As the amount of tax on offshore assets is being remitted through banking channels and registered foreign exchange companies are not yet allowed in the transfer of tax money from abroad, therefore people are facing problems in receiving confirmations regarding their payments in dollars. Normally dollar transactions are cleared in New York. The clearance of such transactions takes a little longer time, three to four days. That is why one of the major demands from tax payers is to allow payment of tax through officially registered exchange companies which is not currently allowed under the scheme.

The tax amnesty scheme offers varying rates that will be charged on hitherto untaxed assets. The tax rates rang from two percent to five percent, whether it is domestic or foreign asset, the asset class, and whether or not it is being repatriated to the country.

The number of active tax payers, which was 2.4 million in president Musharraf era showed a decline of 50 percent over the past 10 years. The PML-N government had to announce tax amnesty scheme to allow people to declare their hidden domestic and offshore assets, avoiding the grim consequences of drive against tax evaders by the Organisation for Economic Cooperation and Development (OECD). The scheme is also intended to provide a boost to fast deckling foreign exchange reserves, which now stand at $ 9.66 billion barely sufficient for two months imports. The FBR expects to fetch $ billion foreign exchange from the scheme. Despite the positive impact of the scheme the tax collection is still far lower than the target of Rs. 4.01 trillion and has to be lowered to Rs. 3.77 billion.

The previous two governments let the tax culture erode and patronized money laundering by political and business elite. According to the data released by FBR, 1.391 million tax payers filed their tax returns in 2016. On the contrary, the number of tax filers dropped to 1.238, showing that 152,749 tax payers slipped from FBR already narrow tax base. Almost 43 percent of registered companies and partnership firms did not file tax returns and the relevant law was not brought into action against them. The World Bank in its report. “South Asia Focus Fall 2017”urged the government of Pakistan to utilise the available data of potential taxpayers with FBR to expand the tax base with a view to generate more revenue from direct taxes and substantially reduce the budget deficit which went up to 6.1 percent of the GDP. A data of 3.8 million wealthy people, who are still out of the tax net, has been available with the FBR since 2010. It remains to be seen whether or not the extension in tax amnesty scheme brings the desired results.

Advertisements
Leave a Reply

Your email address will not be published. Required fields are marked *