After the formal approval from the cabinet, the federal government has rolled out its first tax amnesty scheme. The approval came after much deliberation and proposed changes to the initial draft prepared by the former Finance Minister Asad Umar.
The scheme came into effect from 15th May through a presidential ordinance which has been signed by President Arif Alvi.
The draft documents reveal that the amnesty scheme will last till June 30th, 2019 – 45 days from its introduction.
The government made it clear that this will be the last chance for tax-evaders to disclose their Benami assets and properties and avoid prosecution. The government announced a full-fledged crackdown against the defaulters once the deadline is passed.
Why Was It Necessary?
Adviser to the Prime Minister on Finance Dr. Abdul Hafeez Shaikh, while briefing the media on the scheme, said the government has tried to keep it implementable and easy to understand for people. He said the government has set easy and achievable targets with low rates.
Dr. Hafeez Sheikh said that the primary purpose of the scheme is not to intimidate people but to welcome the business community to participate in the legal economy, the adviser said.
He said the idea behind the amnesty scheme is not to generate revenue but to document the economy and to bring dead assets in account.
Hafeez added that the amnesty scheme was a golden opportunity for the businesspersons to revise their balance sheet.
How Is it Different from PMLN’s Amnesty Scheme?
Dr. Hafeez said that the PTI government has rectified the major mistakes from the last amnesty scheme as it would urge the declarer to deposit all the in hand cash to Pakistani banks along with the deposit slip as proof.
The previous scheme couldn’t add many non-filers as it was mostly availed by filers. The scheme attracted only 25% declarations in immovable properties abroad, mainly in the UAE, UK, and Canada, and most people preferred to keep the money outside Pakistan.
The initial draft of the scheme mentioned that the Foreign Amnesty Scheme was mostly used for money whitening as it neither led to higher tax returns overall nor for the year 2018.
The document said that the PML-N’s amnesty scheme was meant to attract a higher number of declarations, but undisclosed properties and bank accounts remain undisclosed at large.
A Mild Warning
The advisor to PM also issued an alert – a mild one – saying that the government had acquired all the data, but wanted to allow tax defaulters a chance before starting a crackdown against them.
He said people need to realize that this is their only chance to enter the tax net, “once the scheme is closed, they [tax-evaders] will not find any hiding spot.”
Here is the Asset Declaration Scheme 2019:
Here’s everything you need to know about the PTI government’s first and potentially the last amnesty scheme.
- The scheme is called ‘Assets Declaration Ordinance, 2019.’
- It includes the Benami Act – which propels declaration of all Benami assets, FED, and sales tax – something which was missing in PMLN’s last amnesty scheme.
- Compels people to put cash in bank accounts
- Requires tax return filing
- Higher valuation & rates
- Asks for foreign assets to be liquidated and the money to be remitted to Pakistan via banking channels
Benami (Undeclared) Assets
- The scheme has put a tax of 5% on Benami Assets (domestic real estate excluded) if declared before or on June 30 conditioned with liquidation and repatriation of assets into Pakistan.
- The rate will increase to 10% after the given date and to 20% after September 30.
- Those who want to keep their whitened money abroad will be charged a 6 percent tax.
- The defaulters would be dealt with an iron hand after the end of this year.
Domestic Real Estate
- The scheme allows whitening of the undeclared domestic properties against just one percent of the tax.
- The tax will be 2% for declarations between June 30 to September 30 and will double down to 4% between September 30 to December 30.
- A three percent tax will be charged on the undisclosed sales.
Any Other Assets
- It shall be 7.5% of the prescribed value.
So, Who Qualifies to Avail This Opportunity?
As per the document, all companies and individuals qualify for this scheme except:
- Public officer holders since January 2000, their spouses, children, siblings or lineal ascendant or descendants
- Proceed derived from the commission of a criminal offense.
- Those having cases pending before a court of law with the exception of older pending litigation.