THE Federal Board of Revenue is confident of getting its controversial tax amnesty scheme passed in the National Assembly and is making preparations for its implementation in the coming weeks despite the fact that this assembly’s life is hardly two months.
In a letter sent to heads of all tax departments, the FBR has asked them to spare senior officials from representing the revenue body on judicial forums as bulk of human resources would be required after the launch of the Taxpayers’ Registration Enforcement Initiative 2012.
Earlier, the Board had said it would not mind, in fact would prefer, if the scheme aimed at whitening black money was passed and implemented during the tenure of caretaker government.
FBR had also prepared an alternative plan in the middle of this month in case parliamentary approval of the tax amnesty scheme was delayed due to Tahirul Qadri’s long march on Islamabad and its possible negative impact on the working of the government. However, this did not happen.
Under this plan, the FBR was to send notices to 0.5 million tax evaders, directing them to pay taxes with penalties. Major tax evaders were to be tracked through centralised software. FBR has already identified 3.1 million potential taxpayers who enjoy high consumption patterns but do not pay taxes.
However, the Board would have to amend certain rules before issuing the notices, as these evaders were to be asked to file electronic returns.
In the National Assembly, the fate of the bill still hangs in the balance with two key partners of the ruling coalition joining hands with the main opposition party in rejecting the proposed amnesty scheme. This development has at least dampened the prospects of a smooth sailing of the bill in the NA which it found in the meeting of the Senate standing committee on finance.
According to the leader of the opposition, a bill that showers favours on tax evaders rather than tax payers is bound to be set aside by the court even after its passage.
Besides, it should not have been declared a money bill. The FBR chief Ali Arshad Hakeem had stated recently that tax reform is a mammoth undertaking and he did not know whether he would succeed or not but, “I am taking a chance.”
There is a common view that the law the government intends to pass at the fag-end of its term could be construed as a concession for parliamentarians.
It is hardly a prerogative of the outgoing assembly to pass a legislation which is flawed otherwise as well. In fact, it should be left for the next government to debate and decide its fate. FBR has not explained how it would proceed against the tax evaders with the help of amnesty schemes.
The scope of the scheme has not been mentioned anywhere in the bill making it unclear about the implementation of documentation scheme to be introduced by the government.
Many think it is not possible to pass the bill in its present form. Defending the bill, the finance minister says the people to be brought into the tax net are ‘richest among the richest’, hold multiple bank accounts and undertake frequent foreign trips. One would be surprised to see their expenditure, but the money to be recovered from them, he claims, can be used for the poor.
Meanwhile, Pakistan’s top tax machinery has prepared another tax amnesty scheme, second in the row, under which the owners of the smuggled vehicles will be allowed to legalise their vehicles after making a payment of reduced duty and taxes. The summary of this amnesty scheme has almost been finalised and will be submitted to the finance minister for approval.
Officials say there are 100,000 smuggled vehicles in the country mostly used by the influential people. But contrary to this, the customs intelligence had collected data of 2.3 million non-duty paid smuggled vehicles.
They also drive these vehicles in the settled areas and customs officials say that it is not possible for their department with limited manpower to take action against owners of these vehicles who belong to the elite class and pay no duty or taxes at any stage.
Pakistan Association of Automotive Parts and Accessories Manufacturers (PAAPAM) has strongly criticised the tax amnesty for the smuggled vehicles and wants FBR to take punitive action against their owners. Its chairman claimed that the engine numbers of imported used cars were being used for registration of smuggled vehicles as there was no system of verifying their authenticity.
FBR had already launched a drive against the non-duty paid vehicles in Balochistan but it faced resistance from the senators belonging to Balochistan against confiscation drive of smuggled vehicles.
Several economists are of the view that the government should be cracking down on tax-evaders, not letting them off the hook, and warn that the amnesty was effectively an invitation to launder money, as people would not have to declare the source of any illicit earnings. In fact, it would erode the tax system as people would learn the techniques of whitening the black money.
They suggest the government should publish a tax directory and ‘shame’ the evaders instead of introducing this scheme. The FBR chief says part of the plan is to identify the “elite” by their spending — when someone buys or sells a high-value house or car, for example, details of the transaction would be passed on to tax authorities. The government hopes the amnesty will help it meet its target of collecting 2.37 trillion rupees in tax this year, 10.1 per cent of GDP — up from 1.33 trillion in 2008-09.
The amnesty was approved by the federal cabinet on November 14. At the same time, the cabinet also approved proposed amendments to tax laws allowing the FBR to decide cases of arrears stuck in courts through alternative dispute resolution committees.
More than Rs256 billion revenue was stuck in court cases and that after approval of the amendment by parliament the FBR could resolve these cases within 45 days in the committee.