ISLAMABAD – Never in the history of Pakistan tax amnesty on black money hasproduced the desired results in terms of expanding the tax base to generatesubstantial amount of revenue from direct taxes and eliminate the scourgeof tax evasion.
The experiment of so called ‘whitener bonds’ recipe of former visionaryfinance minister Dr. Mahbubul Haq ended in fiasco during the government ogZiaul Haq.
The tax amnesty schemes have inherent weaknesses and are specificallydesigned to benefit the wealthy politicians and businessmen at the expenseof national exchequer and poor people of the country.
Addressing the Pakistan Economic forum, Prime Minister Shahid Khaqan Abbasisaid that one -time tax amnesty will be given on offshore assets but he didnot give the timeframe to implement the scheme. He said that at the initialstage Federal Bureau of Revenue will not ask any question from the citizenswho reveal their hidden assets.
The Pakistan Banking Council has been pushing the demand for the amnestyscheme due to a tightening noose around tax evaders by Organization ofEconomic Cooperation and Development.
The global campaign against the tax evasion will make it difficult toretain untaxed money abroad for long. This will be the fourth tax amnestyscheme during the current PML-N tenure. Earlier three schemes turned outexercises in futility.
This time it aims at saving the skin of all billionaire politicians andbusiness executives, who are facing problems due to tightening globalfiscal laws. The Criminal Finances Act 2017 of the United Kingdom, MoneyLaundering, Terrorist Financing and Transfer of Funds Regulations of theUnited States and Anti Money Laundering laws of European Union are of greatconcern for the Pakistani politicians and businessmen.
Hence they want a certification at abysmally low cost to regularize theirill-gotten wealth. The present government did not make serious efforts topersuade all the registered companies, and unregistered big partnershipfirms to file income tax and corporate tax returns, about 43 percentregistered companies have not filed their tax returns.
The Chartered Accountancy firm AF Ferguson has given a very pessimisticassessment about the repatriation of illegal offshore assets and levying arationalized rate of tax thereon. Pakistanis have parked about $150 billionabroad.
Of the total, $40 billion are parked in foreign real estate either throughoffshore entities or directly. Another $40 billion are deposited in foreignbanks; $20 billion are in the shape of shares in Pakistani Companies and $50 billion are in the shape of other assets, including manufacturingconcerns. Hence at best $ 3 billion to $ 4.5 billion will be repatriated toPakistan.
The Prime Minister also gave a vague picture of the economy in his speechand claimed that energy crisis has been resolved and a roadmap has beengiven for the next twelve years.
He admitted that exports were still stagnant at $20 billion, terming recentgrowth in exports marginal and not sufficient to meet the country needs. Hesaid that Pakistan has to increase its exports to $50 billion. This is aclear rebuttal of the commerce secretary Younas Dagha claim of appreciablesurge in exports which he made in a consultative session of the next tradepolicy 2019-23. The summer of 2018 will be a litmus test as to whetherenergy crisis has been resolved or not.
The rural areas do not have electricity supply for 23 hours; gas loadshedding and low pressure is a daily feature, creating problem for domesticand commercial consumers.
The Prime Minister wishes to achieve exports target of $ 50 billion, but onthe contrary the commerce secretary proposes a growth up to $ 36 billion.The widening current account deficit has increased pressure on foreignexchange reserves.
The data released by the central bank last week reveal that foreigncurrency reserves have further decreased by 2.03 percent and the reservesnow stand at $ 13.742 billion. The foreign currency reserves have beenfalling continuously for the last five weeks.
On January 12, foreign currency reserves held by the central bank wererecorded at $ 13. 699 billion compared to $ 13.982 billion in the previousweek.
The desire for boosting exports to $ 50 billion is worth appreciation, buteven the target of $ 36 billion can not be achieved due to prevailingnegative economic environment created by highly inflated energy tariff andregressive fiscal policy as compared with the energy prices in India andBangladesh and their fiscal and monetary incentives for exporters.
Founder of the Classical economics Adam Smith has rightly said, “If wisheswere horses beggars might have ridden on them all the time.”