ISLAMABAD – Pakistan Business Council (PBC) organized a seminar on thetopic of “Documenting the Economy, closing the Loopholes, Section 111(4)and Foreign Currency (FCY) Accounts” which was held at a local hotel.
Senior Partner A F Ferguson Shabbar Zadi, Chairman Arif Habib Group ArifHabib, Member Council ICAP Ashfaq Yousaf Tola, were among the panelists.Chief Executive PBC Ehasn A Milk moderated the discussion.
Shabbar Zadi told that an exact figure about total undeclared assetsobtained from outside of Pakistan is unavailable. It is estimated that thisamount is about $150 billion. Most of this is not in liquid assets and isparked in real estate. He said that the country’s tax laws are discouragingand have loopholes which enable these foreign tax havens.
Shabbar added,
Pakistan’s tax laws are designed in a manner to not ease documentation,rather they discourage the documentation of the economy. Importers andexporters are involved in under-invoicing and park this money out of thecountry.
Arif Habib in his speech said that in Pakistan, the rate of return isbetter than western countries. The money outside Pakistan has not beeninvested in any projects and is there only to avoid taxes. An amnestyscheme must be introduced to declare foreign assets.
It was estimated that declaring foreign assets would bring 4 to 5 billiondollars in Pakistani economy. If the amount is $1.5 million or less thereis no need to give any amnesty.
He further said that the real problem is not Pakistan’s budget deficit, thereal problem is current account deficit. He also suggests that thegovernment must offload its investment in LNG related projects to provideRs. 300 billion or more, helping finance the budget deficit.
Ashfaq Tola said that Pakistani businessmen are scared of taxadministration and don’t wish to enter the tax regime.
The last amnesty scheme was good but the business community did not comeforward to join the tax net. In this scheme, it was expected that about 2million declarations would be filed but only 10 thousand were filed. Hedemanded a broad-based amnesty scheme.
Tola added,
Pakistan needs to close all loopholes in the laws and systems and thenannounce an amnesty scheme. The scheme must cover foreign, local and realestate declarations.
Ashfaq Tola told that on real estate, the government must reduce the taxrate and increased valuation. If this is not done, real estate will be thebiggest area of black money parking.