ISLAMABAD: The government has delayed an amnesty scheme that will let traders whiten their undeclared assets against a nominal tax payment.

A well-placed source in the Ministry of Finance told Dawn on Monday that broad contours of the scheme are being finalised, but it needed prior feedback from the International Monetary Fund (IMF).

Under the proposed scheme, the government has shown its willingness to allow traders to whiten undeclared assets of up to Rs100 million by paying Rs250,000 in tax.

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However, the upper limit set for the assets did not go well with the IMF, and it sought details from Islamabad, the source added.

As per the original plan, the scheme was about to announce on Nov 30, the source said, adding that the IMF has asked Islamabad to revisit the upper limit of assets whitening scheme because it did not justify the definition of a small trader.

As a result, the government has also extended the last date from Nov 30 to Dec 31 for payment of lower rate of withholding tax of 0.3 per cent on banking transactions.

Earlier, the government has conveyed to the IMF to bring small traders into the tax net by offering them an easy window to become part of the formal economy.

On the request of chambers and association, it has been agreed to offer an amnesty scheme for whitening of assets of up to Rs100m.

As per the IMF definition, small traders can be bracketed for having assets of worth $10,000 to $25,000. Against this amount, the Federal Board of Revenue (FBR) has proposed assets worth of small traders at $10m.

The source said a tax delegation along with a consultant will meet officials of the IMF to finalise the amnesty scheme which is acceptable to the Fund. The meeting will discuss the upper limit of whitening scheme of undeclared assets.

An official privy to the development told Dawn that the FBR has also come up with an amnesty scheme for having two fixed slabs for whitening of undeclared assets if the original plan agreed with the traders was not acceptable to the IMF.

Under the first slab, traders who will declare their assets of up to Rs10m will have to pay a fixed tax of Rs25, 000. Under the second, on the whitening of assets up to Rs20m, a trader will have to pay an amount of Rs50, 000.

A source in the FBR said a meeting is schemed in the next couple of days with traders in which tax department will share the contents of the amnesty scheme with traders. However, the source said traders want the upper limit of assets at around Rs100m.

There is another group in the traders community which seems comfortable even with the upper limit of Rs50m of assets for whitening.

But the source said the IMF is reluctant to allow upper limit of assets whitening beyond Rs25m.

According to the source in the FBR, the tax department will initiate a drive from January 2016 against those non-filers of income tax returns who have taxable assets. Such people will be identified through scrutiny of banks accounts, travel history, etc.

As part of the scheme, the FBR has agreed to create a special block for dealing with the new taxpayers to be brought under the new scheme. The board estimates that four million to five million traders, mostly small ones, will avail the facility and come under the tax net.

Published in Dawn, December 1st, 2015