The federal government has finalised an asset regularisation scheme for non-filers of income tax returns.
It is offering them a chance to declare their hidden assets of up to Rs50 million by paying a nominal 1% of the declared amount in taxes.
Finance Minister Ishaq Dar announced the amnesty package for the non-filers after holding a meeting with the representatives of the traders but refused to divulge its details. Dar said that the package will be formally revealed after seeking approval of Prime Minister Nawaz Sharif.
However, the government will also have to seek the input of the International Monetary Fund that is generally opposed to any such scheme, terming it a source of discouragement for the taxpayers.
This puts the government in a quandary – without an option to whiten their hidden assets, traders are not willing to come in the tax net, but if the government labels the new scheme as an amnesty, the IMF will create problems.
The details of amnesty on assets hidden by filers of income tax returns could not be finalised.
Sources said that the non-filers have been offered to legalize up to Rs50 million of working capital by paying 1% of the value of the asset. For the future, the government has offered them to pay a very nominal rate of about 0.2% of the total sales, as their full and final income tax liability. This arrangement is aimed at addressing the traders concerns about high tax rates once they come in the tax net.
The package for non-filers will end the fear of the Federal Board of Revenue in the minds of those people who are not willing to come in the tax net on grounds that taxmen will harass them, said Dar while speaking to the media after holding a meeting with traders.
In July this year, the government had imposed 0.6% withholding tax on all types of banking transactions carried out by the non-filers of the income tax returns. However, after countrywide protests by the traders, the government lowered the rate to 0.3% and announced it would negotiate with them.
The non-filers, particularly traders, wanted an amnesty on assets that they have accumulated so far and a reduced tax rate in future on the grounds that their profit margins were very thin. The traders have a share of 18% in the national economy, but pay little in taxes.
In Pakistan less than one million people file their income tax returns, although about 45 million pay taxes, mainly withholding taxes, starting from mobile phone bills to almost every kind of consumer good.
Dar said an execution plan including the legal instrument that will be used to give cover to the non-filer package has not yet been finalised. He said that the options included passing legislation through parliament and promulgation of presidential ordinance.
The initial details of the amnesty package that are available so far, suggest that the amnesty scheme prepared by Pakistan Peoples Party government during its last year was far better than the PML-N package.
The PPP government had offered the tax evaders to legalise up to Rs5 million by paying a fee of up to Rs70,000. Hidden assets and income valuing at over Rs5 million were offered to be declared by paying an additional 1% to 1.5% tax.