Whitening of black money picks up momentum after polls - (with thanks to Nizami Khaled)

Since the general election on July 25, the pace of declarations to whiten domestic and foreign assets has gained momentum considerably in the wake of prime minister-in-waiting Imran Khan’s message in his first speech to launch crackdown against tax evaders, according to a source in top tax machinery.
“We have received around Rs2.5 billion in taxes in a single day on Friday,” the source said, terming it the highest amount received in taxes in a single day in the month of July thus far.

Many people are still hoping for the second extension in the tax amnesty scheme but the Federal Board of Revenue (FBR) officials have categorically denied further extension. “As of today, there is no proposal on the table,” the source said, adding the caretaker government has no mandate to further extend it through a presidential ordinance.

On the other hand, the source said the fear factor is evident from the queries received from various quarters seeking explanation for availing the tax amnesty scheme and any further extension.

Even PTI’s prospective candidate for finance minister MNA-elect Asad Umar also announced several times in private television channels programme that his government will initiate massive reforms of the tax department to check evasion and expand the tax net.
As a result of these messages from PTI’s top leadership, the FBR is expecting to receive a good response in taxes on the last two working days of this month.

Under Article 91(2) of the Constitution, the president is bound to convene the first sitting of the National Assembly for the oath-taking of the newly elected members and elections for the speaker and deputy speaker 21 days after the general elections, by August 15.

As per a source in the Ministry of Parliamentary Affairs, dates of Aug 6, 10 and 11 are under consideration for convening the first session of the new assembly. The ministry wanted to see the new government in office before Aug 14.

According to the source, the FBR is also considering to extend the banking timing to facilitate maximum people.

The caretaker government has extended the tax amnesty scheme until July 31.

Since July 1, FBR has received more than 2,500 declarations until July 27. The amount of declared assets was also not significant. The declarants have paid around Rs11bn in taxes so far this month.

Nearly 55,000 people had declared their more than Rs1,770bn worth of domestic and foreign assets under the tax amnesty scheme until June 30 this year and paid around Rs99bn in taxes, with some still in the pipeline.

‘Foreign asset data available’

FBR is facing a considerable shortfall in revenue collection which is also causing higher than expected budget deficit in the outgoing fiscal year.

“We have collected data of all those people who are not on the tax roll,” the source said.

The data is regarding Pakistani who have foreign properties but the same are not declared in Pakistan, investment in real estate, gift schemes, motor vehicles, etc. “We will brief the new finance minister on these data,” the source said, adding a plan is being worked out for issuing notices to these tax evaders after go ahead from the new finance minister.

The amnesty scheme for foreign assets applies to both liquid and immovable assets such as bank accounts, shares and mortgaged properties. Tax rates range from two per cent to 5pc, depending on the type of asset. Special tax rate of 2pc is applicable to liquid assets which are repatriated into Pakistan.

The amnesty scheme for domestic assets covers all types of assets and income, with tax rates of 2pc and 5pc. For payment of tax on foreign assets, the State Bank of Pakistan has devised a procedure whereby tax in US dollars is deposited into SBP’s account via wire transfer.

The government has issued the Government of Pakistan’s US Dollar Denominated Amnesty Rules, 2018, and authorised the SBP to issue these bonds having a maturity period of five years and annual profit of 3pc to be paid semi-annually.

According to the rules, the citizens of Pakistan can invest in these bonds out of remittances declared under the foreign amnesty or through encashment of foreign currency accounts held in Pakistan.

Necessary amendments have also been made to the Protection of Economic Reform Act, 1992, to regulate foreign exchange movements and bring them in line with the Income Tax Ordinance, 2001.

Moreover, amendments have also been made to the Income Tax Ordinance, 2001, whereby the FBR may inquire about the source of foreign remittance above Rs10 million and limitation of five years to probe foreign assets and income has been removed.

Posted on Jul 31, 18 | 7:10 am