–Assets declaration scheme from next week eyes Rs250bn revenue
–‘Benami’ accounts, assets holders to be offered up to 10% tax to whiten money
–Talks with IMF in final stages, says Asad Umar
ISLAMABAD: With the approval of Prime Minister Imran Khan, the federal government is all set to announce another amnesty scheme, in a bid to facilitate benami accounts or assets holders to whiten money, by next week with the aim of generating around Rs 250 billion revenue.
The amnesty scheme – which will be initially launched for 45 days through a presidential ordinance – will be discussed in the federal cabinet’s meeting on Tuesday.
“Since the decision has been made about the asset declaration scheme, we will be sharing details of the new scheme next week,” said Finance Minister Asad Umar while addressing the launching of ‘Medium Term Economic Framework’ here on Monday.
According to an official, the new amnesty scheme is expected to generate around Rs 250 billion revenue, unlike the Rs 150 billion generated through the previous scheme which was launched by the previous PML-N government.
While avoiding to share economic numbers of the medium-term economic framework till finalisation of the agreement with International Monetary Fund (IMF), the minister claimed that the framework was prepared by Economic Advisory Council (EAC) and with consultation with other renowned economists, like Hafeez Pasha.
The minister admitted that during the past 15 years, the public finance management/discipline has literally been broken down. “This government is going to introduce the new public finance management system as required legislation and process has been completed. The supplementary bills are also breaking fiscal discipline. The government is going to stop the supplementary budgets by next financial year,” he said.
Talking about the devaluation of rupee, the finance minister said, “Exchange rate is not [the best] measure of strong economy.”
“At one point, the Pakistani rupee was stronger than the Japanese yen, even though the latter’s per capita income was much higher than ours,” he explained while adding that the past governments had “ruined” the economy by artificially maintaining the exchange rate, and insisted that the practice had to be ended.
“In order to end the practice [of artificially maintaining the exchange rate], economic fundamentals need to be strengthened,” he explained. “By artificially maintaining the exchange rate, we harm our farmers and exporters and give a free subsidy to foreign traders.”
He took a hit at critics who accused the government of having destabilised the economy with the weakening in the rupee-dollar exchange rate, saying the criticism was unfounded.
He also expressed his frustration with TV anchors who have been critical of his policies, suggesting business reporters, “who have a much better understanding of the technicalities of the economy,” to sit with anchors and share their knowledge on how to report on economic matters.
IMF TALKS:
Asad Umar also indicated that the government was all set to complete the agreement with IMF as the talks have reached its final stages. The minister said he was going to attend the IMF Spring meeting to be held in Washington next week.
The finance minister said that, instead of taking easy decisions influenced by “the news cycle or elections”, the Pakistan Tehreek-e-Insaf (PTI) government wanted to strengthen the economy by devising policies that will strengthen the economy in the long term.
He claimed his government will increase the exports to $40 billion by the end to its five-year term. “I will assure you that next finance minister will not crying over the balance of payment issue when he will resume office in 2023,” the minister claimed.
Talking about the current state of economy, the minister said, “the crisis is over. Now we are in the stabilisation process. Once the economy is stable, the country can move towards growth.”
According to him, Pakistan’s economy is still hostage to a huge spending gap and fiscal and current account deficits. “At this stage, the government is borrowing loans in order to pay the interest of old loans. The country’s primary deficit is negative,” he said. The minister also identified low revenue generation by the FBR as a key reason behind the economic difficulties being faced by the country. Drop in exports and low savings also hinder the country’s economic growth, he said.
“Revenue will only increase when the economy develops,” he said and announced that the government had decided to form a separate tax policy unit with experts on board. He also stressed on the importance of using technology to reform the tax collection system. For that purpose, FBR has secured the services of Pakistan Revenue Automation (PRAL) and a board with people with relevant expertise has been formed.
UP TO 10% TAX OFFER:
The government is expected to give a chance to ‘benami’ accounts or assets holders to whiten their money by up to 10% tax offer in the new amnesty scheme which will be announced on April 15, 2019.
As per the information available with this scribe, the assets declaration scheme will allow people to declare their benami accounts and assets and pay taxes till June 30, 2019.
OBJECTIVES:
- Enhancing revenues
- Reducing litigation
- Declaration and reporting of undisclosed assets
- Sales and income for fresh start of a tax complaint economy
- To stimulate movement of funds in order to improve economic activity
WHO WILL QUALIFY?
- All companies and individuals except: holder of public office since 1/1/2000, their spouses, children, brother and sisters or lineal ascendant or descendant
- Proceeds derived from commission of a criminal offence are excluded
- Cases pending before a court of law with the exception of older pending litigation
CONDITIONS:
- Filing and income tax returns or revision thereof for 2018 and payment of tax
- Filing/revising sales tax return for last completed tax period and declaring last five years undisclosed sales and payment of 3 percent sales tax/FED
- Depositing the cash declared in a bank account and retaining the balance till June 30
- Withdrawal of appeals/writs
- Gold and precious stones declarations shall not exceed a value of 5m
TAX RATES:
- The tax rate on ‘benami’ assets will be 10 per cent
- Foreign liquid assets declaration will be 5 per cent
- Credit entries in own bank accounts 1 per cent of the total credit entries from 1/7/2013 to 30/06/2018 or 10% of the peak credits entries during the said period whichever is higher
- 2% of the total credit entries from 1/1/2017 to 15/04/ 2019 on credit entries in ‘benami’ bank accounts or 10% of the peak credits entries during the said period whichever is higher
- 5 per cent on any other assets of prescribed value
IMPLEMENTATION STRATEGY:
- Ownership by leadership
- Emphasis on it’s the ‘last chance’ followed by full-scale prosecutions
- Media campaign
- Enforcement drive with the assistance of banks and NADRA, if required
OLD VS NEW SCHEME:
Sources further said that the incumbent government has learnt some lessons from the last amnesty scheme as 3,344 people repatriated and invested in the government securities. Similarly, under the liquid assets repatriated, 6,428 people whitened their money by paying just 2 per cent.
In the last scheme, filers and non-filers were 5,625 and 570 respectively, and they paid Rs 47 billion. Moreover, sources further said that the government has also evaluated that people prefer to keep money outside the country while local money was used primarily for money whitening.
The foreign amnesty scheme declarations showed 25% declarations in immovable properties (UAE, UK, Canada).
The last amnesty scheme, according to sources, did not lead to a higher number of tax returns or higher tax payments for return of the tax year 2018 and undisclosed properties and bank accounts remained undisclosed. The new policies of FBR have been prepared keeping in view these points and the government is hoping to double tha tax revenue through the new scheme, sources added.
