Tax Amnesty scheme sees massive response

[MenInG]

ISLAMABAD: With days to go before its end, the tax amnesty scheme announced by the Pakistan Muslim League-Nawaz government has seen a surge of interest. According to multiple well-placed sources in the Federal Board of Revenue, so far Rs21 billion has already been raised under it in the form of taxes till June 21.

The tax amount created through the amnesty declaration and deposited in the banks stood at nearly Rs5bn, while the remaining tax amount of Rs16bn has been created in the FBR online system through the submission of challans.

The deadline of the scheme is June 30 which, according to the law, is non-extendable. Pressure is mounting on the government from various sides to extend the deadline.

Rs21bn tax raised thus far; according to law, June 30 deadline can’t be extended

Looking at the numbers of declarations coming in, and those in the pipeline, the sources in the FBR and finance ministry said the total amount of tax paid on assets declared under the scheme could well go as high as Rs100bn, though it was too early to properly calculate this number at this stage.

The details of tax amount created so far were shared with caretaker Finance Minister Dr Shamshad Akhtar on Thursday for approval before sharing it with the media. The minister received the figures, but directed top officials of the FBR not to disclose them to the media at this stage.

It was in this background that FBR spokesperson Dr Muhammad Iqbal at a press conference on Friday did not disclose the tax figure created officially, preferring to say only that the response thus far had been “encouraging”. He went on to claim that its success would help resolve the current account deficit and balance of payment issues. He said the number of beneficiaries of the scheme was increasing every day, and categorically stated that the FBR had no power to extend the deadline.

The scheme became effective from April 10 and expires on June 30. It allows people to voluntarily declare domestic as well as foreign assets that had till April 10 been held beyond the tax authorities’ knowledge and reach. It offers varying rates that will be charged on these assets, ranging from 2 to 5 per cent, depending on whether it is a domestic or foreign asset, the asset class, and whether or not it is being repatriated to the country or now. This is the fourth in a series of amnesty schemes announced by the PML-N government in five years, and comes at a time when many holders of black money abroad are already very concerned about the OECD tax information treaty that Pakistan has signed which will enable automatic sharing of information with many other countries. That automatic sharing is set to begin on Sept 1 of this year.

The FBR spokesperson said the response from people increased overwhelmingly after remarks from Chief Justice of Pakistan Saqib Nisar that the bureau could pursue the scheme. A Supreme Court bench was hearing the case on the matter at its Lahore registry.

A source in the finance ministry told Dawn that after green signal from the Supreme Court, Finance Minister Shamshad Akhtar held several meetings with top officials of the FBR to energise the scheme.

Several technical flaws were discovered in the scheme meant for declaration of foreign assets which needed clarification and improvement along the way. “We have addressed almost all queries and issues raised by intended people who want to declare their foreign assets,” the FBR source told Dawn. These apprehensions were removed in consultation with chartered accounts that are in direct contact with intended clients.

The FBR spokesperson said that several legal measures were already taken in the last budget to penalise those people who would not avail this scheme. He said it would be difficult for people, especially for those who did not disclose their foreign assets.

In the 1958 amnesty scheme, an amount of Rs1.12bn was recovered from undeclared assets, followed by Rs920m in 1968, Rs1.5bn in 1976, Rs10bn in 2000 and Rs3.16bn in 2008. There are several other schemes which were also offered in 1985, 1991, 1998, 2012 and 2016. However, the FBR did not disclose their revenue recovery or beneficiaries.

https://www.dawn.com/news/1415559/amnesty-scheme-sees-massive-response

 

[MenInG]

https://tribune.com.pk/story/1741666/1-fbr-throws-spanner-tax-amnesty-scheme/

ISLAMABAD: Less than a week before its deadline, the Federal Board of Revenue (FBR) has illegally excluded income earned during this fiscal year from the scope of the tax amnesty scheme, and changed the formula for valuation of foreign assets, throwing a spanner in all the work done so far.

The development comes despite the backing extended by all stakeholders to the tax amnesty scheme that would have made it a success.

The tax machinery’s decision to bring about these changes without amending the two laws governing offshore and domestic tax amnesty schemes shake the confidence of people. It also leaves hundreds of people perplexed who have already availed the scheme, which now exposes them to the arm-twisting tactics of tax authorities.

The amnesty scheme was announced through an Ordinance on April 10, 2018, and the last date of availing the scheme is June 30, 2018.

This scheme has blessings from all stakeholders of the state, as the country desperately needs foreign exchange. Official foreign currency reserves held by the State Bank of Pakistan (SBP) hover around the $10-billion mark, and sufficient to finance barely two months of imports.

The FBR spokesman on Friday hoped that Pakistan attracts up to $4 billion through the amnesty scheme. But if the scheme is derailed, it could further complicate the government’s external sector problems.

The changes have been made under the guise of explanations given on the official website of the FBR under frequently asked questions. These two new interpretations have far-reaching implications for Foreign and Domestic Assets Declarations Schemes, which will erode the trust of people who had just started availing it after waiting for over a month.

FBR expects to receive up to $4b in tax under amnesty scheme

Those who plan on filing their declarations are concerned about changes that may be made with retrospective effect by the FBR.

FBR Chairman Tariq Pasha is said to have told his close associates that the feedback given by legal and tax experts and actual declarations received suggested that the tax authority would receive a minimum Rs85 billion in taxes. However, these two changes may stop the people from filing the declarations despite the fact that they were ready to disclose their assets, said the sources.

Income exclusion

Last week, the FBR added a new explanation in its list of questions which states, “You cannot file a declaration for the income earned during the period from July 1st, 2017 till April 9th, 2018. It is because this income would fall in the tax year 2018 and Income tax return for the tax year 2018 is not due by the commencement date of the Act or the last date of applicability of the scheme”. Therefore there is no question of this income being undeclared or undisclosed, it added.

The explanation is contrary to what the Voluntary Declaration of Domestic Assets Act of 2018 states. “Subject to the provisions of this Act, any person may make, to the Federal Board of Revenue…a declaration in respect of undisclosed income and domestic assets acquired before the tenth day of April 2018,” according to the law that the last parliament approved.

Former prime minister Shahid Khaqan Abbasi had shot down the FBR’s proposal to exclude income earned during the fiscal year 2017-18 from the scope of the tax amnesty scheme, said sources involved in these deliberations. After his departure, the same elements have now made these changes, throwing a spanner in the work, the sources said.

The last government of the PML-N had announced the tax amnesty scheme with an objective to offer one last chance to Pakistanis to become part of the formal economy after it gets increasingly difficult to keep undisclosed assets hidden due to the OECD crusade against tax evasion.

But FBR’s spokesmen Dr Mohammad Iqbal has defended the decision to exclude the income earned during the current fiscal year.

The FBR cannot apply two sets of tax rates for income earned in one year, he added. He said there was no question that the FBR would apply standard income tax rates only on the portion of income earned between April 11 and June 30.

The changes made by the FBR and new rules announced by the SBP on Friday regarding investing in government’s dollar-denominated bonds have given virtually no time to the people to respond to these changes. There are just five working days left in which the scheme can be availed.

The only way out now seems an extension of at least two weeks in the amnesty scheme through a Presidential Ordinance to allow the people to avail the scheme.

The FBR should not confuse normal income tax returns that will be filed for the tax year 2018 and it should treat the declarations of the amnesty scheme separately, said Masood Naqvi, a chartered accountant by profession and a member of the Tax Reforms Commission (TRC). Naqvi hoped that the FBR would rectify this mistake.

Assets’ valuation change

In yet another illegal move, the FBR has also introduced a new explanation about the valuation of foreign assets. The FBR has stated that for the purpose of determining the Pakistani Rupee value of the apartment the SBP-determined exchange rate of the date of filing declaration needs to be used. The FBR has cited Section 9 of the Foreign Assets Declaration Act to justify its decision.

But this will inflate the value of an asset that has been acquired many years ago.

For determination of the value of the foreign asset, Section 2 (d) is the relevant section. It states, “Fair market value means the price of foreign assets determined and declared by a declarant himself, but in no case is less than the cost of acquisition of the foreign assets”.

Section 9 is about the charging the tax and it cannot be used for the valuation of a foreign asset, said Ashfaq Tola, a tax expert and also a member of the TRC. He said many people have already filed their declarations and this new definition by the FBR was not legally tenable and will be challenged in court, jeopardising the whole scheme.

Sources said that both these explanations were not part of the set of questions that have been agreed between Finance Minister Dr Shamshad Akhtar and legal and tax experts. It suggests that the FBR is not taking the caretaker finance minister into confidence.

After the applicability of these two explanations, the effective tax rates for domestic and foreign assets schemes will be considerably higher than the rates approved by parliament. But more than the rates, it is an issue of trust that the FBR has breached again, said a legal expert.

Relief for public office holders

These are not the only two changes that the FBR has made without taking into confidence the political leadership. Earlier, the bureaucracy changed the date for public office holders from their exclusion from the scheme. The Ordinance that the last government had promulgated in April barred all those who have held public office since January 1, 2000 from availing the tax amnesty scheme.

But the law passed by parliament in May reduced the exclusion period to the last ten years, allowing public office holders during the General Musharraf era to avail the scheme.

Ill-prepared FBR

The FBR’s electronic portal has also been facing technical hitches, delaying the filling of amnesty declarations. The FBR’s lack of preparedness for the scheme can be gauged from the fact that till Tuesday last week there was no mention of infamous but big tax havens like Luxembourg, British Virgin Islands and Bermuda on its e-portal, sources said.

 

[MenInG]

ISLAMABAD: With the curtain set to drop on the amnesty scheme by the end of the day (Saturday), nearly 5,000 people have filed returns declaring their foreign assets and deposited approximately Rs80 billion in taxes till June 28, Dawn has learnt through knowledgeable sources.

However, the final amount is going to be much higher, since the sources confirm that more funds are in the pipeline based on payment slips issued.

Multiple sources in the Federal Board of Revenue (FBR) revealed that the tax amnesty scheme announced by the Pakistan Muslim League-Nawaz government, which got off to a lacklustre start, saw a surge of interest since the last hearing in the case held in the Supreme Court’s Lahore registry on June 11.

So far, two single largest declarants of foreign assets were from Karachi and Peshawar. A Karachi-based person has deposited Rs3.2 billion in tax on his foreign assets, while a woman hailing from Peshawar paid Rs1.2bn, also on her foreign assets.

Another influential businessman from Karachi, who owns multiple businesses, paid an amount of Rs267 million on his undeclared foreign assets.

A Karachi-based individual has deposited Rs3.2 billion, while a woman from Peshawar paid Rs1.2bn on her foreign assets

The deadline of the scheme is June 30 (today) which, according to the law, is non-extendable. Pressure is mounting on the government from various sides to extend the deadline.

Finance Minister Shamshad Akhtar is scheduled to arrive from Paris on Saturday and is expected to take up the matter then.

The sources in the FBR and finance ministry said the total amount of tax paid on foreign assets declared under the scheme could go beyond Rs100bn by the final tally since substantial sums remain in the pipeline and more declarants are stepping forward.

The government has taken extraordinary precautions to keep information of declarants confidential. FBR chairman Tariq Pasha and his core team including member Policy Dr Muhammad Iqbal and Special Assistant to chairman Malik Amjad Zubail Tiwana are the only ones with access to the information submitted by declarants.

Chairman Pasha will leave the board on June 30 and assume his new office as secretary statistics division. No decision has been taken regarding the transfer of other two officers who were also in the good books of former finance minister Ishaq Dar.

FBR official spokesperson Dr Muhammad Iqbal was repeatedly asked for details but he was unwilling to share the information.

The sources said that people were still declaring their foreign assets through challans, but were facing some problems. People in the Middle East want to declare but have several problems like weekends on Friday and Saturday.

People in Europe and other western time zones, where Saturday and Sunday are off-days are also facing similar problems as the deadline falls on a Saturday (today).

The declaration on domestic assets has no such issues. The FBR has already made an arrangement with the banks for not only opening of branches on Saturday and Sunday but also extended the timing for receiving the taxes. No data is available on the number of declarants for domestic assets, or the amount collected in taxes through the scheme thus far.

The amnesty scheme allows people to voluntarily declare domestic as well as foreign assets that had till April 10 been held beyond the tax authorities’ knowledge and reach. It offers varying rates that will be charged on these assets, ranging from 2 per cent to 5pc, depending on whether it is a domestic or foreign asset, the asset class, and whether or not it is being repatriated to the country.

Several meetings have been held on the possibility of an extension in the deadline. According to one proposal, the scheme can be extended with higher rates. However, this amount will be counted for the tax year 2017. Another proposal suggested that asset declarations could be allowed now with attendant tax payments to be made later. The fate of both proposals is unknown.

In the 1958 amnesty scheme, an amount of Rs1.12bn was recovered from undeclared assets, followed by Rs920m in 1968, Rs1.5bn in 1976, Rs10bn in 2000 and Rs3.16bn in 2008. There are several other schemes which were also offered in 1985, 1991, 1998, 2012 and 2016.

However, the FBR did not disclose their revenue recovery or beneficiaries.

The scheme got off to a slow start as it awaited legislative action as well as a nod from the Supreme Court. Its conversion from an ordinance to an act of parliament was delayed due to opposition in the National Assembly and Senate, but was eventually passed as a separate act. The Supreme Court’s nod took a while longer, coming eventually by mid-June. Interest in the scheme was lacklustre until then, but the response became brisk immediately after the Supreme Court announced it would not be taking any action to encumber the scheme. Since then, FBR and market sources confirm, the pace of the response gathered speed on a daily basis.

https://www.dawn.com/news/1416971/amnesty-pulls-in-rs80bn-tax-amid-massive-response

 

[AssassinatedDevil]

Federal cabinet extends tax amnesty scheme for a month

ISLAMABAD: As more than Rs100 billion worth of contributions from amnesty scheme are expected to provide some face-saving to the tax machinery, the caretaker government on Saturday extended the scheme for one month aimed at allowing people to take full benefit of the last opportunity.

The federal cabinet approved a summary for promulgation of a Presidential Ordinance to amend the Foreign Assets (Declaration and Repatriation) Act, 2018 and the Voluntary Declaration of Domestic Assets Act to extend the amnesty schemes for offshore and domestic assets.

President Mamnoon Hussain promulgated the ordinance, giving effect to the one-month extention.
The scheme had originally been offered from April 10 to June 30 but people started availing late due to delays on part of the authorities.

The government has given one-month extension in the amnesty scheme without changing the tax rates, two members of the cabinet confirmed to The Express Tribune.

Federal Board of Revenue (FBR) Chairman Tariq Pasha told The Express Tribune that the FBR would announce the annual revenue collection for fiscal year 2017-18 that ended on Saturday and the amnesty extension decision at a later stage.

The PML-N government had announced the scheme to allow people to declare their hidden domestic and offshore assets amid a drive against tax evasion by the Organisation for Economic Cooperation and Development (OECD). The scheme was also expected to provide a boost to foreign currency reserves.

The FBR has not officially announced the results of the tax amnesty scheme for the period of April 10 to June 30. But the sources said the tax amnesty scheme had also provided a face-saving to the FBR.

Despite around Rs120 billion expected tax contributions from those who have availed the scheme, the FBR’s annual revenue collection was not even close to hitting Rs3.8 trillion by 11.00 pm on Saturday. The Rs120 billion includes the amounts declared in the challan forms but are not deposited in the kitty.

The actual amount that came in the kitty from the tax amnesty scheme was Rs75 billion till Saturday, said sources in the FBR. This suggests that at least Rs2.4 trillion domestic and foreign assets have been whitened by the people since the launch of the scheme on an average rate of 3%. The government has offered the people to avail the scheme without disclosing their sources of income.

Despite a positive impact of the scheme, the collection was still far lower than the original annual target of Rs4.013 trillion and downward revised target of Rs3.935 trillion. Excluding the impact of the tax amnesty scheme, the FBR’s collection was mere Rs3.7 trillion – higher by only 10%.

This was despite the fact that the FBR’s customs wing has exceeded its original Rs581.3 billion target by a wide margin. The collection on account of customs and regulatory duties exceeded Rs605 billion, which was even higher than upward revised target of Rs600 billion. The Rs605 billion was roughly 16% of the provisional total collection by the FBR till 11.00 pm.

The problematic area for the FBR remained sales tax and income tax collection.

However, Pasha, the FBR’s outgoing chairman was hopeful that the FBR would touch Rs3.9 trillion collection figure once all the payments of the tax amnesty scheme are received in the treasury, according to the sources in the FBR.

The June 30 was the last day of the chairman FBR who has been posted as secretary statistics in place of Rukshana Yasmeen, who has been appointed as new FBR chairman.

The delay in issuance of necessary clarifications by the FBR and late finalisation of rules for amnesty bonds by the State Bank of Pakistan wasted about two months, leaving less than two weeks to avail the scheme.

For the fiscal year 2017-18, which was the last year of the PML-N’s five-year rule, parliament had approved Rs4.013 trillion tax collection target. Including all the receipts, the FBR’s provisional collection of Rs3.77 trillion that was higher by roughly Rs410 billion or 12.2% than the collection of the previous fiscal year.

This is despite the fact that the FBR had taken additional revenue measures of more than Rs150 billion including imposition of regulatory duties. Secondly, the positive impact of 14% devaluation of the currency on the tax collection was minimum Rs65 billion. Thirdly, the nominal GDP growth of about 10% (inflation plus real GDP growth) should have fetched additional Rs336 billion in collection.

The combined effect of these three factors should have been Rs540 billion, which suggests revenue leakages. The impact of higher collection of taxes on the petroleum products due to increase in their prices was in addition to this.

The state cannot tap the real potential of revenue unless stringent measures are taken to combat money laundering and eliminating parallel economy, said Dr Ikram-ul-Haq, an advocate Supreme Court of Pakistan.

The shortfall in revenue collection would further widen the budget deficit that has already touched 6.1% of the Gross Domestic Product (GDP) or Rs2.1 trillion. Parliament had approved Rs1.4 trillion or 4.1% of the GDP budget deficit.

The sources in finance ministry said due to massive shortfall in tax collection and huge politically motivated spending before elections by the last government, the budget deficit could touch 7% of GDP or Rs2.4 trillion.

https://tribune.com.pk/story/1746982/2-federal-cabinet-extends-tax-amnesty-scheme-month/

 

[WebGuru]

Bank deposits surged by Rs1 trillion, or 7.43%, to Rs14.46 trillion in the month of June due to the tax amnesty scheme

KARACHI: Bank deposits surged by Rs1 trillion, or 7.43%, to Rs14.46 trillion in the month of June mainly due to legalising of black money under the tax amnesty scheme.

The deposits had been at Rs13.46 trillion at the end of May 2019, according to the State Bank of Pakistan (SBP). “The jump is clearly due to the amnesty-related flows; prize bond encashment, real estate, US dollar conversion, etc,” Alpha Beta Core CEO Khurram Schehzad said.

Under the Assets Declaration Scheme 2019, about 137,000 citizens got their hidden assets worth Rs3 trillion legalised by paying nominal taxes at 1.5-6%, totalling Rs70 billion. The Pakistan Tehreek-e-Insaf (PTI) government launched the scheme on May 14, which ended on July 3 this year.


Source: https://tribune.com.pk/story/2008991/2-slow-growth-bank-deposits-surge-7-43-june-2019/

 

[Adijazz1706]

That's a lot of black money, at least PTI managed to get it back into the system

 

[MenInG]

The government has decided to promulgate an ordinance to offer a third tax amnesty scheme in as many years -- this time to industrialists -- by offering them to whiten their black money at 5% rate by investing in the manufacturing sector.

The amnesty is part of an industrial package that also includes tax benefits for three years on acquisition of sick industrial units, besides allowing overseas Pakistanis to invest in the country’s manufacturing sector and freely take back the profits earned and the capital investment.

The decision to give another tax amnesty scheme may put the just revived $6 billion International Monetary Fund (IMF) programme at stake, as the global lender bars giving any tax amnesty scheme. Sources said that the government had not taken the IMF into confidence.

The finance ministry circulated a summary among the federal cabinet members on Monday for their approval of the tax amnesty scheme through the Income Tax Amendment Ordinance 2022. Prime Minister Imran Khan will formally launch his third amnesty scheme in Lahore on Tuesday (today).

The official documents showed that the scheme had been prepared in haste and due to paucity of time, the approval of the Cabinet Committee for Legislative Cases (CCLC) had also not been obtained.

The prime minister dispensed with the condition of submission of a summary to the CCLC and approved the submission of the summary to the Cabinet through circulation, according to the summary.

The government had decided to waive 24% tax rate and another 29% penalties by allowing the people to invest their black money, giving 49% bonanza to the industrialists. An industrialist could avail the tax amnesty scheme by investing Rs50 million.

Read Desire for talks not sign of weakness: PM

The arms and ammunition, explosives, sugar, cigarettes, aerated beverages, flour mills, vegetable ghee and cooking oil industries could avail the new tax amnesty scheme. At least three new sections would be inserted in the Income Tax Ordinance of 2001 to allow the people to avail the third tax amnesty scheme.

These were the Sections 59C to carry forward of business losses of sick industrial units, the Section 65H for tax credit for the investment for industrial promotion and the Section 100F for investment in industrial units.

The government has also decided to waive the requirement of only clean and white money investment in order to incentivise the people to invest in new and existing industrial units. The government has waived the applicability of Section 111 of the income tax law to allow investment of dirty money in the industrial sector.

Concessions have also been offered for the revival of sick units and the incentives for investment in industries by non-resident Pakistanis and resident Pakistani individuals having declared foreign assets, according to the documents.

According to the Promotion Package for the Industry, the government has decided to offer a 5% across-the-board tax rate and immunity to the investors from the investigation about sources of investment. An investor will establish a new industrial unit through the creation of a new company to avail of the tax amnesty scheme.

Similarly, existing units can also avail the facility for balancing and modernisation. The cut-off date for availing of the amnesty scheme will be December 2022 with the condition of starting the commercial production by the new unit by June 2024, according to the decision.

According to another leg of the package, the government has decided that those companies returning a net loss in the last 3 years will be eligible to be acquired by healthy profit-making companies, which will be incentivised to adjust the sick company’s tax losses for the next 3 years.

The Industrial Package further provides that if eligible non-resident Pakistanis and the resident Pakistani individuals repatriate their declared foreign assets into Pakistan for investment into industry, they would be entitled to 100% tax credit for the next five years.

According to the ordinance, a non-resident Pakistani citizen, having continued non-residential status for more than five years; or a resident individual having foreign assets declared by December 31, 2021, will be entitled to avail the scheme.

A possible adverse reaction from the Financial Action Task Force (FATF) and the IMF remains a concern. The IMF’s Resident Representative Ashter Perez could not be contacted due to paucity of time, while Finance Minister Shaukat Tarin also did not reply whether he took the IMF’s permission before giving the amnesty scheme.

The IMF has barred Pakistan from giving further tax amnesty scheme during the currency of the IMF programme after the PTI government gave a tax amnesty scheme in May 2019 to allow people to declare their ill-gotten and black money.

Then again, the PTI gave second tax amnesty scheme to the construction sector in April 2020. But the second amnesty had been given with the IMF’s consent under the guise of providing relief to the people from the adverse Covid-19 impact.

However, according to the prime minister, Pakistan’s industrial sector required an immediate boost for economic growth as well as for “providing employment to our youth” besides increasing share of manufacturing sector in the gross domestic product (GDP).

No public office-holder, including his wife and children, are allowed to take part in this scheme. Similarly, people who filed declaration under the amnesty schemes of 2018 and 2019 are also debarred from availing his scheme and so are people who are habitual loan defaulters, according to the officials involved in discussions.

 

[transparent opacity]

Govt bars agencies from investigating tax amnesty schemes

ISLAMABAD:
The government has legally barred financial crime-investigating agencies from seeking any information related to tax amnesty schemes, including the latest money whitening scheme, saving the necks of six top taxmen from the hands of the National Accountability Bureau.

These schemes were announced respectively by former premier Shahid Khaqan Abbasi and Prime Minister Imran Khan in 2018 and 2019 to legalise the offshore and domestic assets and the 2022 scheme, which was officially announced on Tuesday to facilitate the industrialists by whitening their black money.

The move, made through Income Tax Ordinance of 2022, will also bury these files forever or until the law is amended again. The government has also stopped the general public from seeking any information about these three tax amnesty schemes under the Right to Information Act of 2017.

NAB and the Federal Investigation Agency cannot ask the Federal Board of Revenue (FBR) to share information about the beneficiaries of offshore and domestic tax amnesty schemes of 2018 and 2019 and the 2022 industrial sector tax amnesty scheme, according to the cabinet documents.

The decision has been taken to stop NAB from asking the FBR to share classified information, which under the tax laws is protected and cannot be shared with anybody.

Upon refusal by the FBR to share this information, NAB had served call-up notices on nearly half a dozen top taxmen for not providing legally protected information that a taxpayer had shared with the FBR under the 2019 offshore assets tax amnesty scheme.

The anti-corruption watchdog had sought the information about seven people, belonging to a political family of Khyber-Pakhtunkhwa, according to the documents of NAB and the FBR.

The government has amended sub-section 2 of Section 216 of the Income Tax Ordinance that deals with the disclosure of information to keep NAB and the FIA at a distance from the information submitted to the FBR under the three tax amnesty schemes.

“Notwithstanding anything contained----the National Accountability Ordinance, 1999, the Federal Investigation Agency Act, 1974 and the Right of Access to Information Act, 2017, or any other law for the time being in force, no court or other authority shall, save as provided in this Ordinance, require any public servant to produce before it any return, accounts, or documents contained in, or forming a part of the records relating to any proceedings under this Ordinance, or declarations made under Section 100F of this Ordinance or made under the Voluntary Declaration of Domestic Assets Act, 2018, the Foreign Assets (Declaration and Repatriation) Act, 2018 or the Assets Declaration Act, 2019 or any records of the Income Tax Department generally, or any part thereof, or to give evidence before it in respect thereof.”

It is the second time in the past six months that the government has directly or indirectly amended Section 216. Last time, the government amended Section 216 to share general public’s information with NAB and give legal cover to an illegal act by the tax authorities.

In September, the government had deleted Section 198 of the Income Tax Ordinance of 2001 to give NAB access to data of taxpayers with effect from 2001.

The omitted Section 198 said, “A person who discloses any particulars in contravention of Section 107 or Section 216 shall commit an offence punishable.”

But the latest amendment has been made to save the senior FBR members from undue pressure exerted by NAB. NAB was asking about the information of a person whose name had surfaced in the Panama Papers.

But the person had availed the tax amnesty scheme and the FBR informed NAB that the law stopped its people from sharing the tax and asset information of those who availed the amnesty schemes. The Law Division also backed the FBR’s position.

NAB still served the call-up notices on members of information technology, operations, administration, legal and headquarters of the FBR. Incidentally, those who had received call-up notices were eligible to be promoted and their names had been communicated to the Establishment Division for consideration by the promotion board.

The sources had told The Express Tribune that out of the seven members of the political family, only one person had availed the tax amnesty scheme and he was not a public office holder. The law says that no tax amnesty declaration can be used as evidence against the declarant. It also says that the amnesty law will override any other law for the time being in force.

The income tax law also bars the taxmen from disclosing taxpayers’ information. However, this clause has now been amended to the extent of high public office holders and civil servants.

NAB was of the opinion that under Section 27 of the National Accountability Ordinance 1999, the confidentiality clause contained in the Voluntary Declaration of Domestic Assets Act, 2018 is inapplicable to the NAB Ordinance because it has an inherent power to proceed in this regard, according to the documents.

https://tribune.com.pk/story/2345988/Govt-bars-agencies-from-investigating-tax-amnesty-schemes

 

[MenInG]

Pakistan on Friday could not break its impasse with and the International Monetary Fund (IMF) over Prime Minister Imran Khan’s tax amnesty scheme and his Rs246 billion relief package.

However, the finance ministry said the global lender had agreed to extend talks for another day. The negotiations could not be concluded by its original schedule that ended on Friday, as Islamabad was requesting one month to reconcile matters, sources told The Express Tribune.

A scheduled virtual meeting between Finance Minister Shaukat Tarin and the head of the IMF team, Nathan Poter, also could not take place on Friday, indicating that both sides were struggling to even come closer to a position where some understanding at the top level might be achieved. “The 7th review talks will now continue on Monday [March 14],” said Finance Secretary Hamid Yaqoob Sheikh.

He said the finance minister might also meet with the IMF team on Monday. The finance secretary dispelled the impression that these were not review talks. “Both sides are holding the 7th review of the IMF programme.” According to the original schedule agreed between Pakistan and the IMF, the review talks were planned to be held between March 3 and March 11.

During this period, Tarin was twice scheduled to meet with the IMF team. However, only one meeting was held on Wednesday, a day after the originally scheduled time. The final session between Tarin and Porter had been set for Friday evening but it did not take place either. “We do not have anything meaningful to tell the IMF after the announcement of the relief package,” an official privy to these talks told The Express Tribune. Sources said the government’s strategy so far was to keep buying time from the IMF.

However, any further delay would mean that Pakistan would not be able to avail the complete $6 billion package, as the country had to complete three more reviews from now till September. The sources said that there were three major stumbling blocks, the PM’s Rs246 billion relief package, the asset whitening scheme and the way forward to rationalise the personal income tax rates of individuals, as the IMF sought to cut the number of slabs from 11 to 4.

They said the energy sector’s circular debt was also above the threshold agreed with the IMF and the tax refund arrears were also higher than the limit set by the global lender. Under the IMF conditions, Pakistan can neither give any more tax amnesty scheme nor was it entitled to hand over tax breaks to industrialists. The IMF saw the completion of the sixth review of the programme in January as a major step towards normalisation of policies for addressing external and fiscal sector imbalances.

The PTI-led government agreed with the IMF to implement a prudent macroeconomic framework in January this year in return for the revival of the stalled loan programme. The government and the central bank have implemented most of the IMF conditions concerning monetary and fiscal targets agreed for end-December 2021. However, they are in serious violation of the condition of “not to grant further tax amnesties”. They are also in violation of not intervening in the exchange rate market.

Subject to timely conclusion of the talks, the IMF board may take up Pakistan’s request for approval of over $960 million in loan tranche before the end of next month. Approved in July 2019, the IMF has so far disbursed $3 billion out of the $6 billion package, as the programme has remained derailed for almost half of the period. Just one month after its approval, the programme suffered a setback when PM Imran announced a Rs246 billion relief package without caring for its implications for the review talks.

As against the requirement of showing Rs25 billion primary budget surplus, the sources said, there could be a primary budget deficit of over 1% of the gross domestic product (GDP) or Rs665 billion even at the revised base of the economy. The Express Tribune reported this week that as against the budget estimates, the federal budget deficit was now projected over Rs4.3 trillion for this fiscal year, roughly Rs318 billion higher than the target despite slapping a mini budget.

Two days ago, the finance minister had said Pakistan conversed with the IMF about the PM’s relief package only to the extent of what was necessary. Tarin had added that the IMF should not have problems with the relief package, as Pakistan was neither increasing its fiscal deficit nor taking any loans to provide relief to the people. He said the government was able to announce subsidies on the back of improved revenue collection.

However, he had admitted that as against the IMF requirement of having nominal primary budget surplus, there could be a primary budget deficit of half a percentage of the GDP by the end of the current fiscal year. Tarin had said the PM’s relief package would cost an additional Rs110 billion because of a reduction in fuel prices and the government would bear a sum of Rs136 billion by reducing the electricity prices by Rs5 per unit, bringing the total impact to Rs246 billion.

https://tribune.com.pk/story/2347581/impasse-with-imf-over-pms-tax-amnesty

 

[Itachi]

Let me get this straight. This scheme let's you make your black money into white. If you pay the liabilities, I don't see it as big issue.

But why govt is preventing any investigation though? Is there "something" to hide?

 

[MenInG]

The government has decided to withdraw blanket immunity that the taxmen had secured in the previous political regime to protect themselves from adverse actions after they shared personal tax information of high-profile public officials with investigation agencies.

During any next legislative opportunity, the section 216 (T) of the Income Tax Ordinance will be withdrawn, said Finance Minister Dr Miftah Ismail on Wednesday.

Through an amendment in the tax law, the previous government had allowed the taxmen to share the personal information of the high public officials with National Accountability Bureau (NAB) and other investigation agencies with effect from 2001. Many then had questioned the motives of the amendment.

The action was seemingly aimed at giving protection to the taxmen for illegally sharing the information of a Supreme Court judge with the investigators and also handing over the taxpayers’ data to the National Database and Registration Authority (NADRA).

Former prime minister Imran Khan lamented this week that he should not have sent the reference against Justice Qazi Faez Isa to the Supreme Court.

Through another amendment, the government had also repealed section 198 to protect the taxmen from the punishment of sharing such classified information.

“Section 198 shall be omitted and shall always be deemed to have been so omitted since the commencement of the Income Tax Ordinance 2001,” according to the ordinance.

The previous government had also made two other critical amendments in the Income Tax Ordinance aimed at formally handing over taxpayers’ data to NADRA and arresting people in income tax evasion cases.

But despite making so much political noise, these legal powers remained untested.

During an informal conversation with media persons on Wednesday, FBR Chairman Dr Mohammad Ashfaq said that so far no tax recoveries have been made with the help of NADRA.

In fact, the data integration between the FBR and the NADRA has not yet been completed, said the chairman.

The previous PTI government had claimed that those one million filers who paid zero tax would have to pay actual tax liabilities based on NADRA data information.

The government had included a new section 175B in the Income Tax Ordinance to hand over all data of existing as well as non-existing taxpayers to NADRA to broaden the tax base.

Earlier, the powers were only limited to the extent of the unregistered persons.

But the FBR chairman said that NADRA’s aggregate tax numbers are not relevant to the FBR, as the tax machinery has to go deeper into every individual taxpayer’s case.

The PTI government had also inserted section 203A in the Income Tax Ordinance to get powers to arrest people for their failure to pay due taxes.

To a question, the FBR chairman said that no arrest has been made by invoking section 203A. He said that the section had been inserted in the law in a particular context but it was not used.

Former Finance Minister Shaukat Tarin had underlined that the government wanted to use the powers to arrest only for deterrence and did not intend to arrest more than 20 to 25 people.

The Tax Laws (Third Amendment) Ordinance 2021 had also empowered the FBR to disconnect mobile phone and electricity connections of the non-filers of the income tax returns, according to the ordinance. But even then the tax base could not be broadened.

Meanwhile, the FBR on Wednesday launched the Inland Revenue (IR) Strategic Reform Plan (2021-25) with the support of international donors including the World Bank, Foreign, Commonwealth and Development Office (FCDO), International Monetary Fund (IMF) and Asian Development Bank.

The FBR chairman said that the IR Strategic Reform Plan 2021-25 encapsulated FBR’s vision for the future.

The country’s premier revenue collection organisation aspires towards building a stronger and more modern institution, driven by the principles of integrity, efficiency and effective service delivery, he added.

Dr Ashfaq reiterated that the plan envisaged the transformation of IR into a world-class, technologically-savvy and taxpayer-centric service.

The FBR said that plan clearly sets the reform agenda for the four-year period from 2021-22 through to 2024-25.

The plan provides reform actions to improve tax administration in the four strategic reform areas, which include improving tax compliance, strengthening tax administration, building institutional capacity and reinforcing the legislative framework.

Furthermore, the IR plans to address the challenge of low tax compliance through implementing a compliance risk management capability; improving registration, filing, payment and reporting compliance; reducing the cost of compliance, strengthening the audit capability, streamlining processes, and procedures.

The IR Strategic Plan will be reviewed on an annual basis to ensure programme’s sustainability and viability.

The envisaged reforms have the potential to structurally improve the performance of the tax system and make significant contributions to revenue mobilisation.



Published in The Express Tribune, April 21st, 2022.

 

[MenInG]

Pakistan’s apex business body has proposed drastic measures to Prime Minister Shehbaz Sharif to contain budget and current account deficits including the rationing of electricity, an increase in individual tax rates and an amnesty for the rich to lure them to put their dollars in the central bank’s coffers.

The Federation of Pakistan Chambers of Commerce and Industry (FPCCI) has also recommended tax-free encashment of cryptocurrencies in Pakistan and converting foreign exchange into Pakistani rupee.

It has also suggested encashment of cryptocurrencies in Pakistan and held as deposits in foreign exchange accounts with the central bank at 5% tax rate and encashment of cryptocurrencies in Pakistan and held as deposits in Roshan Digital Accounts at 10% tax for non-resident Pakistani nationals and dual nationals.

The recommendations have been forwarded to PM Sharif last month aimed at reducing the budget deficit by Rs1.1 trillion through the combination of expenditure rationalisation and increase in taxes and containing the current account deficit by curtailing or banning altogether certain imports.

However, some of these recommendations are contrary to the principles agreed under the International Monetary Fund (IMF) programme such as the tax amnesty scheme or are politically unpopular like increase in individual tax rates and withdrawal of fuel subsidies from July.

The PML-N led coalition government is grappling with serious challenges of potentially a record high budget deficit of Rs5 trillion to Rs5.6 trillion and a current account deficit close to the pre-IMF programme of $19 billion by the end of this fiscal year.

The apex business body has suggested that the PM should request the nation to reduce the use of electricity during peak hours and a scheduled load-shedding for two to four hours per day to help curb pressure on the current account amid the ongoing economic turbulence.

However, the less utilisation of electricity may not provide relief to the consumers and the government, as it will increase the idle capacity payments to power producers.

This will also undermine the economic growth prospects. The country recently faced hours of load-shedding after power plants could not be run due to shortage of fuel.

The FPCCI has proposed to PM Sharif that the government should launch an incentive scheme to channelise dollar holdings from lockers and personal safes into bank accounts.

The government may exempt such deposits from taxes, if these have not been declared earlier in tax returns, which will be held in local accounts for at least one year, according to the proposal.

The tax amnesty scheme is against the IMF programme, which the government may not find feasible as it attempts to revive the stalled bailout package.

Rather than controlling imports through regulatory duties, the FPCCI advocates for a blanket ban on non-essential items amid the current state of economic emergency.

A World Bank study has said that Pakistan’s 80% of imports either comprise raw materials or intermediary goods and their curtailment will have implications for economic growth.

The FPCCI has proposed to cut interest rates from 12.25% to 7% to save interest costs, which will also help to reduce the budget deficit by Rs300 billion.

According to the SBP, government borrowing stood at around 63.6% of the total outstanding loans in March 2022.

It said that higher policy rates erode the fiscal capacity of the government as the cost of debt increases.

The businesspersons’ apex body has backed the IMF demand to increase the income tax rates for individuals.

It said that the current structure of personal income tax in Pakistan was relatively less progressive.

The total number of income tax slabs in Pakistan is 11 as opposed to 5-7 slabs in peer countries.

“It is recommended to reduce income tax slabs from 11 to 5-7 slabs in order to increase the progressivity of income tax. According to the IMF estimates, this would help mobilise additional revenues worth Rs200 billion by the fiscal year 2024.”

The FPCCI has also backed the withdrawal of fuel and power subsidies on a priority basis as these subsidies are fiscally unsustainable.

The artificial fuel price freeze is held off till the budget and PSDP funds be made available till then and then be gradually increased every month.

Express Tribune

 

[MenInG]

The Pakistan Information Commission (PIC) has directed the Federal Board of Revenue’s chairman to provide information about the individuals and companies who reaped benefits from the amnesty scheme given during the tenure of former premier Nawaz Sharif.

The order came after a citizen named Waheed Shahzad Butt lodged a complaint against the FBR’s chief, alleging that the agency was trying to hide crucial information solely to “provide egregious benefits to tax criminals of the nation”.

The citizen had also previously approached Lahore High Court (LHC) and Federal Tax Ombudsman seeking disclosure of information pertaining to companies and persons who availed the clause 86 of Second Schedule to the Income Tax Ordinance, 2001 and the amount introduced under it.

The appellant stated that he had submitted information requests to the FBR chairman on March 5, 2018. He added that the introduction of any tax amnesty scheme for tax evaders was “nothing but the height of immorality fully sponsored by the state”.

The government, instead of entertaining any such scheme, should seriously consider introducing an “asset-seizure scheme to confiscate undeclared and untaxed assets created from black money,” he contended and stressed the need for laws to bring back “looted money from tax cheaters”.

However, the tax authority rejected the request of the applicant due to prohibition under section 216 of the Ordinance, 2021.


https://tribune.com.pk/story/235788...close-details-of-amnesty-scheme-beneficiaries