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CNIC is your new tax number: PM’s 5 radical tax fixes

ISLAMABAD: Prime Minister Shahid Khaqan Abbasi has unveiled five-point radical reforms aimed at bringing more people under tax net and providing one-time amnesty to non-filers. “Unfortunately, only 700, 000 people pay income tax from across the country and of that many have no other option but to pay it. About 500,000 people pay zero tax,”...

SAMAA | - Posted: Apr 5, 2018 | Last Updated: 4 years ago
SAMAA |
Posted: Apr 5, 2018 | Last Updated: 4 years ago

ISLAMABAD: Prime Minister Shahid Khaqan Abbasi has unveiled five-point radical reforms aimed at bringing more people under tax net and providing one-time amnesty to non-filers.

“Unfortunately, only 700, 000 people pay income tax from across the country and of that many have no other option but to pay it. About 500,000 people pay zero tax,” said Prime Minister Abbasi while addressing a press conference in Islamabad.

“We have decided to take radical reforms. It is the biggest obligation of a citizen to pay income tax so that the country could be run effectively. Non-payment of income tax is a criminal act. When people who can afford don’t pay taxes in our country, the undue burden is shared by others through indirect taxes, which is an unfair system of taxation.”

The prime minister said that there would be five basic elements of these reforms.

Use of technology 

“Modern technology will be used to collect more taxes. Traditional method of tax collection will be avoided and those who don’t pay taxes will face government’s action,” he said.

CNIC is your tax number

The prime minister said that any citizen who holds a valid computerized national identity card will be allotted the same tax number. “The CNIC will be the tax number. We have 120 million CNIC holders. All can become the tax payers by simply filling a form,” he said.

Income tax rate to become sustainable

“It has been decided to reduce the income tax rate substantially. Those earning Rs1.2 million a year will be exempted from the income tax. There will be five-percent tax on income up to Rs2.4 million a year and those who earn up to Rs4.8 million annually will have to pay 10 percent tax. “It’s a substantial tax reduction. We hope people will start taxes now,” Mr. Abbasi said.

One-time amnesty scheme launched

According to the Foreign Assets Declaration and Repatriation Ordinance issued by the government, dollar account holders in Pakistan who have purchased dollars through undeclared money can also regularize on two-percent payment and declare foreign fixed assets on 3 percent payment.

Foreign Liquid assets including cash/securities/bonds etc. held abroad and in local dollar accounts may be declared at 5% payment, it said.

Similarly, all undeclared incomes earned before June 30, 2017 on all local assets (gold, bonds, property etc) can be regularized on a payment of 5 percent penalty.

He said that it was mandatory to announce an amnesty scheme to widen the tax net.

“We are announcing one-time amnesty scheme for those who have evaded taxes. We believe that those who are citizens of Pakistan should be given the opportunity to whiten their assets. There will be five-percent penalty to bring the money into tax net. It will a one-time penalty.”

Prime Minister Abbasi said those who own assets abroad will have to pay two percent penalty to whiten their money. “If you bring $100, you will have to pay $2 as tax and i you maintain a USD account in a foreign bank, you will have to pay five-percent tax,” he added.

The amnesty scheme will be effective till June 1, 2018.

Foreign Assets declaration 

Foreign Liquid assets including cash/securities/bonds etc. held abroad and in local dollar accounts may be declared at 5% payment.

All remittances less than 100,000/year/person will continue without any questions from any agency about the source and enjoy tax exemptions.

All remittances greater than 100,000/year/person will enjoy tax exemptions but only FBR may question the source. Any new foreign exchange accounts can only be opened by tax filers.

Voluntary Declaration of Domestic Assets Ordinance 

The federal government will to have power to buy individual properties anywhere in Pakistan within six months of registration for: 100% more for properties registered in FY 2018-19 (50%), 75% more for properties registered in FY 2019-20 (57%) and 50% more for properties registered in FY 2020-21 & thereafter (67%).

Taxpayer identification

“The current databases are in isolation. We are trying to merge them. The government will have visibility of every transaction a citizen makes. We will be able to tell every detail of your transactions including payment of bills, school fee, shopping and foreign trips etc,” he added.

Pakistan’s progress on access to international information 

Pakistan has signed and ratified the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters.

This has established an exchange of information mechanism for tax purposes with more than 100 countries, including tax havens. This has enabled us to seek information on banking and other details of our residents from these countries for taxable periods 2018 onwards and for tax matters involving intentional conduct which is liable to prosecution, for earlier taxable periods as well.

Voluntary declaration of domestic assets ordinance 

All undeclared incomes earned before June 30, 2017 on all local assets (gold, bonds, property etc) can be regularized on a payment of 5%.

FBR rate on property being abolished from 1st July 2018 and provinces being requested to abolish DC rate. No purchase of property over Rs. 4 million is possible for nonfilers of tax returns from 1st July 2018.

The new scheme is not applicable to public office holders/ people in service of Pakistan including their spouses and dependent children.

Rabbani flays govt

Senator Raza Rabbani said that the tax amnesty scheme announced by Prime Minister Abbasi was a ploy to whiten black money. “Why is government taking important decision in haste?” he questions.

The government had brought such schemes in the past also, he said, adding that no announcement has been made to  benefit the people.

The former Senate chairman said it was wrong to overlook the Parliament on key issues.

Twitter upset with PM’s tax reforms

Twitter was not happy with tax reforms unveiled by Prime Minister Abbasi that included an amnesty scheme for tax evaders, among other things.

One person said that there were no tax benefits for the common man and that accountability was the need of the hour.

Others were critical of the amnesty scheme announced by the prime minister for tax evaders.

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