Pakistanis who wish to turn black money white now have until June 30 to take part in the government’s amnesty scheme, the details of which were revealed by Finance Advisor Hafeez Shaikh on Tuesday.
“This scheme’s basic goal is not to earn revenue,” he said. “It is for the documentation of the economy.” He was flanked by Information Advisor Firdous Ashiq Awan, FBR Chairman Shabbar Zaidi, Minister of State for Revenue Hammad Azhar at a press conference in Islamabad.
It is a tax amnesty scheme for the declaration of assets. The idea is to take the debt assets and put them in the economy to become active, he said.
“We have tried for this scheme to be easy to understand and implement. So people do not have a difficult time using it.” The rates are not that high, he added. And there will only be a few of them.
“The philosophy is not to scare people and threaten them but to encourage business people to participate in the legal economy.”
People have until June 30 to get involved. Every Pakistani citizen can participate, except those who are in a position in the government or have been in government.
The scheme is for all assets in Pakistan or outside Pakistan. The rate is 4%.
If you are abroad and you declare your assets here, and it is cash, then they will have to be kept in a bank account.
For real estate the FBR value will be applied and 1.5% more so it is closer to market value. And so, for example, if the FBR value for real estate is Rs1 million, it will be whitened at Rs1.5 million.
If any person is taking money abroad and they want to whiten it, they can. But for example, if they have 10,000 dollars, they have to give 4% and the rest they have to put in a Pakistan bank account, whether foreign exchange or local. But if they don’t want to bring here and keep it abroad, then they have to give an extra 2%. That comes to 6%.
Shaikh then referenced the ‘Benami law’ that has been passed. If an asset has not been declared, then it can be confiscated and the person can go to jail, he said. Under the Benami Law, property will be confiscated if not declared. There’s also a possibility of jail time. “It is up to Shabbar Zaidi; he has been given a full mandate to give incentives,” said Shaikh. “But if the wealthy people won’t come forward and contribute and keep black money, for such people there should be action. That’s why we are saying: This is the last chance to try and come and participate based on the incentives which have been offered.”
This facilitation or scheme is for Benami accounts or properties in Pakistan; you can whiten them, he added. This has to happen before the law is implemented to escape its “sakhti” or toughness.
Shaikh then went on to talk about the Pakistan-IMF negotiations that went on for a month. He said that a staff level agreement has been reached. After this the IMF board will rectify the agreement. This was “necessary” for Pakistan, he said, given how things were going.
He said that the goal was to reduce the trade gap and debt burden which was in Pakistan’s favour.
Some people are fearful that inflation might go up, he said. We have taken steps to make it easy for people. For example, if electricity prices go up, it won’t affect users consuming less than 300 units and the government has allocated Rs216 billion in the budget. Seventy-five percent of consumers will benefit from this.
They are almost doubling the budget of the BISP and Ehsas programs. Instead of Rs100 billion, it will be Rs180 billion. Similarly, if gas prices go up, they have taken steps to save 40% of low-end users.
He then went on to talk about the PSDP, which is Rs550-Rs600 billion. In the coming fiscal year, we are keeping a budget of Rs700-Rs800 billion for the PSDP so projects of national interest are not affected.
“It is true that our revenue collection has been below expectation,” Shaikh said. “We are taking decisions to improve it. These steps, with the new FBR chairman and the government’s resolve, will be reflected in the budget. For this you’ll have to wait for a few weeks.”
Currently in Pakistan, three property rates are applicable, said FBR chairman Shabbar Zaidi. One is the DC rate, the second is the FBR rate and the third is the price or market value. On 22 places, the FBR rate is applicable whereas the DC rate is applicable everywhere. “Under the law that is being passed, which will hopefully be enacted by tonight, properties will be evaluated at the market price and shouldn’t be less than one a half times the FBR rate,” he said. That is 1.5% of what should be paid.
He said that declarations for public office holders is the same as was under the previous law. One more amendment that we have done is that their dependents will also be included. If any government servant has a Benamidar, he can’t avail the amnesty.
According to Hafeez Shaikh, the information base on which the FBR can pursue matters is also increasing. “We have information on almost 150,000 accounts in 28 countries,” he said. “This is also a very valuable data source which can be used. We are also trying to use technology to integrate financial regulators such as the FBR, SBP, SECP etc.”
Zaidi added by way of explanation, that the FBR, FIA, SBP, SECP, all have the data of economic transactions but the data is disintegrated. “We are trying to integrate it,” he said. “So, if anyone is involved in any economic transaction, we should be able to bring them in the tax net.”
Responding to a question on whether this will really be the last IMF program for Pakistan, Shaikh said: “Every time we go to the IMF, it is agreed that there are some basic flaws with Pakistan that need to be fixed. Those include that Pakistan has never been able to increase its exports, from the beginning foreign investors have hesitated investing here, our big institutions remain loss-making and put a massive burden on the people of Pakistan.”
Revenue cannot be mobilized so that wealth is collected from the rich and spent on the people. He said that there were four to five major flaws that Pakistan needed to work on. “If we remain unsuccessful in addressing these challenges, then just as has happened in the past, IMF programs came and gave us recoveries for three to four years and after that we because we were not able to address our basic flaws, then it rises again. What happened in the last five years? Pakistan might be the only country where exports did not increase at all. So in a situation, where you have so much imports and your exports are not increasing, then you have to pay for the imports. That is the price we are paying today.”
Responding to a question that such amnesty schemes were introduced in the past and they failed, Hammad Azhar said: “For example, the scheme that was introduced last year, there was no condition of becoming a tax filer. People who will declare assets under this scheme, we are making it mandatory for them to become a tax filer. Secondly, we are not doing this for revenue. We want that the black money in our economy comes into the productive sectors and for that we are allowing business[people] to revise their books and revise their assets. We are giving them the option of a Balance Sheet revision.”
Another mistake in the last amnesty scheme was that people were given the option to declare cash-in-hand without any proof. People used to declare their future earnings in the amnesty because the cash was never shown. But now, all cash-in-hand would need to be deposited in a bank and it will be declare in the amnesty with deposit slips. “We are not registering properties at the FBR or DC values,” he said. “Properties can only be declared at 1.5 times the FBR value. All provincial authorities have agreed to revise the DC rates to bring them closer market values by the first of July.”