Tax Amnesty Scheme: Golden opportunity for wealthy politicians, businessmen to convert black money into white

Tax Amnesty Scheme: Golden opportunity for wealthy politicians, businessmen to convert black money into white

ISLAMABAD - Never in the history of Pakistan tax amnesty on black money has produced the desired results in terms of expanding the tax base to generate substantial amount of revenue from direct taxes and eliminate the scourge of tax evasion.

The experiment of so called ‘whitener bonds’ recipe of former visionary finance minister Dr. Mahbubul Haq ended in fiasco during the government og Ziaul Haq.

The tax amnesty schemes have inherent weaknesses and are specifically designed to benefit the wealthy politicians and businessmen at the expense of national exchequer and poor people of the country.

Addressing the Pakistan Economic forum, Prime Minister Shahid Khaqan Abbasi said that one -time tax amnesty will be given on offshore assets but he did not give the timeframe to implement the scheme. He said that at the initial stage Federal Bureau of Revenue will not ask any question from the citizens who reveal their hidden assets.

The Pakistan Banking Council has been pushing the demand for the amnesty scheme due to a tightening noose around tax evaders by Organization of Economic Cooperation and Development.

The global campaign against the tax evasion will make it difficult to retain untaxed money abroad for long. This will be the fourth tax amnesty scheme during the current PML-N tenure. Earlier three schemes turned out exercises in futility.

This time it aims at saving the skin of all billionaire politicians and business executives, who are facing problems due to tightening global fiscal laws. The Criminal Finances Act 2017 of the United Kingdom, Money Laundering, Terrorist Financing and Transfer of Funds Regulations of the United States and Anti Money Laundering laws of European Union are of great concern for the Pakistani politicians and businessmen.

Hence they want a certification at abysmally low cost to regularize their ill-gotten wealth. The present government did not make serious efforts to persuade all the registered companies, and unregistered big partnership firms to file income tax and corporate tax returns, about 43 percent registered companies have not filed their tax returns.

The Chartered Accountancy firm AF Ferguson has given a very pessimistic assessment about the repatriation of illegal offshore assets and levying a rationalized rate of tax thereon. Pakistanis have parked about $150 billion abroad.

Of the total, $40 billion are parked in foreign real estate either through offshore entities or directly. Another $40 billion are deposited in foreign banks; $20 billion are in the shape of shares in Pakistani Companies and $ 50 billion are in the shape of other assets, including manufacturing concerns. Hence at best $ 3 billion to $ 4.5 billion will be repatriated to Pakistan.

The Prime Minister also gave a vague picture of the economy in his speech and claimed that energy crisis has been resolved and a roadmap has been given for the next twelve years.

He admitted that exports were still stagnant at $20 billion, terming recent growth in exports marginal and not sufficient to meet the country needs. He said that Pakistan has to increase its exports to $50 billion. This is a clear rebuttal of the commerce secretary Younas Dagha claim of appreciable surge in exports which he made in a consultative session of the next trade policy 2019-23. The summer of 2018 will be a litmus test as to whether energy crisis has been resolved or not.

The rural areas do not have electricity supply for 23 hours; gas load shedding and low pressure is a daily feature, creating problem for domestic and commercial consumers.

The Prime Minister wishes to achieve exports target of $ 50 billion, but on the contrary the commerce secretary proposes a growth up to $ 36 billion. The widening current account deficit has increased pressure on foreign exchange reserves.

The data released by the central bank last week reveal that foreign currency reserves have further decreased by 2.03 percent and the reserves now stand at $ 13.742 billion. The foreign currency reserves have been falling continuously for the last five weeks.

On January 12, foreign currency reserves held by the central bank were recorded at $ 13. 699 billion compared to $ 13.982 billion in the previous week.

The desire for boosting exports to $ 50 billion is worth appreciation, but even the target of $ 36 billion can not be achieved due to prevailing negative economic environment created by highly inflated energy tariff and regressive fiscal policy as compared with the energy prices in India and Bangladesh and their fiscal and monetary incentives for exporters.

Founder of the Classical economics Adam Smith has rightly said, “If wishes were horses beggars might have ridden on them all the time.”