Tax Amnesty 2018 has come to an end. It was an ambitious plan by the former government. For state, it was supposed to serve two primary purposes: (i) Broadening the tax net; (ii) Repatriation of foreign assets. For the public, it was yet another opportunity to whiten black money and declare all the undeclared assets. So how successful has the scheme been? This article takes a look at the situation from several perspectives.
Domestically, the Tax Amnesty 2018 is being considered the best of all seven such schemes so far. A total of 82,848 people availed the current tax amnesty scheme, according to a news report. Of these, 77,845 were the ones who availed the domestic amnesty scheme, while the remaining 5,353 availed the foreign amnesty.
As it is, the FBR is yet to release the official figures because, according to an FBR representative, there are yet to be some payments for which slips have been issued. The official figures will be announced after these payments are made. However, unofficial reports indicate that a total of PKR 2.5 trillion has been declared under the current amnesty scheme. It should be noted that these are conservative reports—other reports claimed a total declaration of PKR 6 trillion.
Under the former report, it has been claimed that as a result, FBR has recovered a total of PKR 121 billion under the amnesty scheme, which includes USD 360 million availed under Tax Amnesty 2018. In PKR, the division of recoveries stood at PKR 44 billion for foreign amnesty, and PKR 77 billion under domestic amnesty.
In any case, the recoveries far outstrip any of the former amnesty schemes – at least the ones for which the data was revealed by Federal Board of Revenue (FBR). PKR 1.12 billion was recovered in 1958; PKR 920 million was recovered in 1968; PKR 1.5 billion was recovered in 1976; PKR 10 billion in 2000; and, PKR 3.16 billion in 2008.
So it wouldn’t be wrong to consider Tax Amnesty 2018 a success, at least when compared to the previous schemes. It is also being felt that the amnesty scheme helped widen the tax net, so it met that goal as well.
Response for offshore amnesty
Whereas the response on domestic amnesty has been fantastic, the response on foreign amnesty was less than desirable. It was expected that around USD 2 billion to USD 3 billion will be repatriated under the foreign amnesty scheme. This would have helped shore up Pakistan’s rather dwindling foreign exchange reserves.
Experts are of the opinion that one reason why the government needed to provide constitutional guarantees for the scheme to make it really successful. Those were not provided because of political hurdles.
The new government is expected to have even more assertive plans for taxation. It is also what the Prime Minister in waiting said in his policy speech: the tax net will be widened and action will be taken against tax evaders.
FBR has already been sending notices and is expected to become active even further. The FBR has also made an agreement with OECD countries to gather data on foreign assets. It is expected that more will be done on this future as well.
In short, it seems there is no going back as the authorities are moving to regularise taxation and real estate. An undeniably good thing to come out of the amnesty scheme is that all the whitened money is likely going to go into real estate since that remains the best investment avenue in the country. It will provide a needed boost to real estate in the country.