Apr 7: Tax amnesty scheme by Abdul Quayyum Khan Kundi

PM Abbasi and Adviser to PM on Finance Miftah Ismail announced a tax amnesty scheme. The scheme was instantly rejected by opposition parties. After consultation with PTI members, our policy position is a disappointment with the way government and opposition parties are dealing with critical national issues. PML N government is famous for acting as a monarchy and not building consensus prior to announcing a policy. The opposition, on the other hand, is using the issue for scoring political brownie points rather than further the debate to solve economic issues. For last one month, almost all major newspapers and electronic media reported that an amnesty scheme is under development. Parliament standing committee on Finance and Revenue should have been involved in the process which seems not to be the case from the reaction of the opposition. Lastly, opposition instead of just opposing the amnesty should also come up with an alternate plan. The behavior and attitude of both government and opposition are responsible for growing mistrust of politicians among people. Vote ku izzat du also mean to do your work as agents of people and not just to keep control of the country to benefit and enrich themselves.

Now coming to the tax and amnesty scheme announced. We support the government proposal to reduce the tax burden of the salaried class. We also support conversion of CNIC into a tax number as this should help us increase number of taxpayers. But one of the key factor for the low number of tax filing is the lack of trust in the government that the funds will not be used effectively to provide services to people. It is important that the trust deficit issue is addressed as well as simplification of the tax code. Lastly, the impact of the change in tax threshold because new tax structure will have an adverse effect on revenue collection that could range from Rs.100 to 500 billion (as per a report source FBR). How would the government fund this revenue gap?

We do not support the amnesty scheme for the following reasons:

– Amnesty should be a one time deal and should have severe punishment component to it. It seems government is offering incentive but does not sound serious enough to punish repeat offenders.

– In recent years many amnesty schemes have been offered. Those that availed past schemes should be exempt from availing the current scheme and should be prosecuted for tax violations if any.

– Instead of offering tax amnesty to all government should first reach out to 439 people listed in Panama Papers and offer them an amnesty for bringing foreign funds to the country. Once this exercise is done then a new scheme should be announced that has severe punishment for those that continue evading taxes.

– Continued political instability in the country will discourage people to avail the scheme. It is important that government build consensus. Failure of the scheme to attract funds will have serious long-term consequences impacting both economy and security.

– The government narrative is that this amnesty scheme will result in increased economic activity and job creation. Traditionally those that avail amnesty in Pakistan use those funds in non-job creation activities like buying property and stocks. The amnesty should impose a condition that funds brought under the scheme cannot be invested in property or stocks. The government can offer long terms special tax rates for businesses created using these funds depending on the number of jobs created.

We hope that both government and opposition parties will have more positive attitude and consider our suggestions and comments.

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