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Tax Amnesty - 2018
Government of Pakistan announced two tax amnesty
schemes, namely, Foreign Assets (Declaration and
Repatriation) Ordinance, 2018 for undisclosed foreign
assets and Voluntary Declaration of Domestic Assets
Ordinance, 2018 for undisclosed income and domestic
assets. However as required by the Constitution, both
Ordinances were placed before the Parliament and through
Finance Act 2018, these became Voluntary Declaration of
Domestic Assets Act, 2018 for undisclosed income and
domestic assets and Foreign Assets (Declaration and
Repatriation) Act, 2018 for undisclosed foreign assets.
These Acts were further amended through Presidential
Ordinances on June 30th, 2018.
The original closing date for filing declarations under
the amnesty scheme was June 30th, 2018. It has been
extended till July 31st, 2018 on account of
representations from trade bodies, professional
associations and general public due to short operational
period after clearing legal and procedural challenges
and problems faced by declarants in the payment of tax
on foreign assets and repatriation of liquid assets. The
Presidential Ordinances dated June 30th, 2018 amended
the amnesty acts to extend the applicability date of the
schemes and to include explanations on ambiguities such
as exchange rate. The amendment Ordinances have also
provided for revision of declarations.
Public response to the schemes has been positive. So
far, 55,225 declarations have been filed in which
declared value of foreign assets is around Rs. 577
billion and that of domestic assets is around Rs. 1,192
billion. Declarants have paid around Rs. 97 billion out
of which around Rs. 36 billion have been collected on
foreign assets and 61 billion on domestic assets. In
addition, $ 40 million has been I repatriated. This
response to the amnesty schemes has been unprecedented.
Amnesty scheme for foreign assets applies to both liquid
and immovable assets " such as bank accounts, shares and
mortgaged properties. Tax rates range from 2% to 5%,
depending on the type of asset. Special tax rate of 2%
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
2% and 5%. To protect declarants from any harassment,
both schemes under Voluntary Declaration of Domestic
Assets Act, 2018 and Foreign Assets (Declaration and
Repatriation) Act, 2018 promulgated on 8th April 2018
which eventually was made part of Finance Act 2018 to
ensure complete confidentiality of declarant’s
information. Moreover, such information cannot be used
as evidence against declarants under any other law.
Finance Minister is closely monitoring the operation of
the amnesty schemes and constantly advising both the FBR
and SBP for improving payment procedures and ensuring
effective facilitation. As per directions of the Finance
Minister, FBR has p set-up helplines, which operate 24/7
with dedicated telephone lines and e-mails for quick
response to queries. FAQs, online user guide and all
relevant documents A have been published on FBR’s
website (www.fbr.gov.pk) which are periodically updated
on the basis of queries raised by intermediaries and
declarants. Frequent
interaction with private sector including accounting
professionals and tax practitioner bodies have been
helpful. Similar arrangements have been put in place in
SBP.
The online user guide provides step by step information
regarding registration under the amnesty schemes,
procedure for payment of tax and submission of
declarations. Officers well versed with the features of
the amnesty schemes have been assigned the task of
responding to queries. There is also a fully functional
IT support team which regularly monitors online IT
system. For payment of tax on foreign assets, State Bank
of Pakistan has devised a procedure, whereby tax in USD
is deposited into SBP’s account through wire transfer.
Governmnet of Pakistan’s US Dollar Denominated Amnesty
Rules, 2018, whereby SBP has been authorized to issue
these bonds having a maturity period of` five years and
annual profit of 3% to be paid semi-annually. According
to the rules, 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.
The low rates of the Amnesty Schemes ranging between 2%
- 5% and is a major incentive for declaring undeclared
assets and income. Pakistan has also become a signatory
to the OECD Multilateral Convention which will provide
access to information about offshore financial accounts
of Pakistani residents from September 2018. This will
enhance the capacity of FBR due to access to offshore
financial accounts of Pakistani residents held in the
signatory countries. Necessary amendments have also been
made in the Protection of Economic Reform (PERA) Act,
1992, to regulate FX movements and bring it in line with
Income Tax Ordinance, 2001. Moreover, amendments have
been made in the Income Tax Ordinance, 2001, whereby FBR
may inquire about the source of foreign remittance above
Rs.l0 million and limitation of five years to probe
foreign assets and income has been removed.
Above all, revenues from the amnesty schemes will help
in documentation of the economy as well as bring in
onetime payment from non-declarant to officialise their
assets. Equally critical is to support Pakistan in its
endeavour, to reduce poverty and uplift its population
which off`-course depends on effective prioritization of
development spending. |
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