ISLAMABAD: Prime Minister Shahid Khaqan Abbasi Thursday announced a tax amnesty scheme coupled with an income tax reforms package to bring the non-taxpayers and tax evaders into the tax net and broaden the revenue base of the country where only 1.2 million people out of the total population of 207 million pay taxes.
Under the one-time amnesty scheme, which would be available till June 30, 2018, local and foreign assets in the shape of cash could be whitened by paying 5% and 2% penalty respectively on the undeclared assets, Prime Minister Abbasi told a crowded press conference here at the PM Secretariat. The amnesty scheme also provides a facility of one-time payment of 3% penalty for whitening of non-cash assets.
The prime minister announced that those having undeclared dollar accounts in foreign countries could declare the same and whiten the money by paying 5% of the undeclared dollar amounts. He, however, clarified that the ‘politically exposed’ people and their families would not be eligible to benefit from the new amnesty scheme.
Unveiling details of the proposed reforms package, the prime minister said the existing income tax rates which were up to 30% – and one of the main reasons for tax evasion – would be reduced substantially and made sustainable. He said income tax rates for individuals were being proposed to be rationalised as a person having an annual income of up to Rs 1.2 million would be exempt from income tax. While 5% income tax would be charged on those with income ranging from Rs 1.2 million to Rs 2.4 million per annum; 10% on up to Rs 4.8 million income per annum, and 15% on over Rs 4.8 million income per annum.
The prime minister said the computerized national identity cards (CNICs) of 120 million citizens would be considered as their national tax numbers.
He said as people hide their assets by injecting black money in property and then declaring the same much less than the original value, the government has proposed to impose 1% tax on property, which could be adjusted in the overall annual income tax. The federal government would also ask the provinces to lower the rates to one per cent to discourage the practice of under-statement of property value, he added.
The prime minister said in order to check the under-statement of property value, the government would have the right to purchase a property on double the value declared by the owner during the year 2018-19, at 75 per cent more in 2019-20 and at 50 per cent more in 2020-21.He said it would not be possible for non-filers to purchase any property for over Rs 4 million. He said the proposed scheme would make the DC (District Collector) rates of the property irrelevant and the people would have to declare the real value of their property.
The prime minister said the scope of the ordinance to be issued in this regard would extend to every resident company, resident association of persons and all citizens of Pakistan wherever they might be except holders of public office. It would help regularize all undeclared income earned before June 30, 2017, on all local assets, including gold, bonds and property on payment of 5 % tax.
The prime minister said technology would be used for taxpayer identification and a comprehensive database would be established to monitor the financial transactions of every citizen having a CNIC, including payment of utility bills, school fees, foreign travels, etc.
He said the proposed scheme would also help check corruption as Federal Board of Revenue (FBR) officials would not be issuing notices on their own and the notices would be served only on the basis of data gathered through monitoring of financial transactions of citizens during July 1 to June 30 of every fiscal year.
The prime minister said those benefitting from the one-time tax amnesty scheme would be protected in the ordinance, and those who would not avail the opportunity would be identified and penalized. He said every citizen was duty bound to pay due taxes so that the state can run its affairs in a smooth way. He said when the people do not pay due taxes, the government has to go for indirect taxation which burdens the common man.
The prime minister pointed out that half a million people from a total of 1.2 million taxpayers in Pakistan paid zero tax and 90% of the remaining 0.7 million taxpayers were those who had no choice as they were salaried persons.
He ruled out the impression that the amnesty scheme was aimed at facilitating any particular individual and clarified that those having assets under offshore companies would also be allowed to repatriate their assets by paying the announced penalties.
He said the amnesty scheme was solely meant for increasing the tax net and bringing in revenue for the government as increase in direct taxation would ultimately decrease the indirect taxes.
To a question, the prime minister said there should be around 30 million taxpayers and the government could achieve the mark if efforts were made. He said the taxation was part of manifestos of all the political parties and that no party could oppose decreasing the tax rate.
To a question, the prime minister said tax evaders would be dealt with strictly by detecting them through the use of technology and the government would question them to justify their assets beyond their income declared in the tax returns. However, the sentence for the evaders would be decided by the parliament, he added.
He said through legislation, the government would also plug all loopholes in the existing laws, which were being misused for tax evasion. To another question, the prime minister said those who had been relieved of taxes in the package would also have to file their returns showing zero tax.
Amnesty scheme
* Local undeclared cash assets: 5% tax
* Foreign undeclared cash assets: 2% tax
* Local/foreign non-cash assets: 3% tax
* Undeclared foreign dollar accounts: 5% tax
Income tax reforms
* Rs 1.2 million annual income: 0% tax
* Up to Rs 2.4 million per annum: 5% tax
* Up to Rs 4.8 million per annum: 10% tax
* Over Rs 4.8 million per annum: 15% tax
Property tax reforms
* 1% adjustable tax on property
* Govt will have right to purchase any property:
a) At 100 more the value declared by owner during 2018-19
b) At 75 per cent more in 2019-20
c) At 50 per cent more in 2020-21
* FBR rate on property to be abolished from July 1
* Non-filers can’t purchase property worth over Rs 4 million
Published in Daily Times, April 6th 2018.
