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Yet another amnesty scheme

Published Jan 10, 2017 01:10am


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A NEW amnesty scheme is being considered to allow those who hold wealth abroad to bring it back into the country without facing a penalty other than paying a nominal amount of tax on the value of the declared asset. If approved, this would be the fourth or fifth amnesty offered by this government, depending on how one defines the term. This time the step is made necessary by the arrival of a new tax convention created by the Organisation for Economic Cooperation and Development which mandates the sharing of tax information with other countries. Once the convention is in force, the state here will be able to directly access records of bank accounts, registered companies and other assets maintained by Pakistanis abroad, and, in turn, will be compelled to share such information with foreign governments. This exchange is tied to bilateral agreements at the moment, but come 2018 Pakistan could be part of a global regime to automatically share tax-related data with signatory countries. The government has already begun searching for ways to motivate people to start thinking of declaring their foreign assets against a nominal tax.

Not many people are afraid of the bilateral sharing mechanisms in place today, but once automatic sharing kicks in there will be genuine grounds for concern for those who hold undeclared wealth in offshore locations. For now though, it appears the impending amnesty scheme for foreign assets will be nothing more than what its predecessors have been: thinly veiled revenue measures. The long list of such revenue measures disguised as amnesty schemes and documentation exercises now give the government the appearance of pleading for cooperation with racketeers and tax evaders. The total lack of will and capacity to pursue any meaningful reform and expand the tax base has driven the government into this corner. Now a new challenge is beginning to open up in the form of global regimes for the sharing of tax information, as well as closing the financial system to abuse by illicit and tax-evaded wealth.

The OECD convention is only the latest example. Before this we had an Anti Money Laundering Act, which had to be amended to include tax evasion as well. That too was prompted by a tightening of the regimes that seek to choke off access to the financial system for illicit players. Failure to properly move on that front is complicating corresponding banking relationships for many Pakistani banks. The State Bank has recently cautioned that these complications could raise transactions costs for banks, which could impact remittances. Being a nursery of rackets is becoming more and more difficult for Pakistan given how global financial and tax regimes are evolving. If the will and capacity to drain the swamp of black money cannot be found, costs in the future could be severe.

Published in Dawn, January 10th, 2017

Comments (5) Closed

Gujjar jat Jan 10, 2017 01:45am

Why would they bring it back to get it all taxed? Duh! wasn't it the reason to keep it offshore in the first place?

Syed F. Hussaini Jan 10, 2017 04:54am

The OECD convention is another boon for our officials; they would turn it into a cost-effective racket.

The rich would calculate; go abroad and live with their treasure or stay home and share some money with the officials?

Whatever is cheaper.

asadlateef Jan 10, 2017 09:54am

no body want to pay thier due share of taxes

Khaled Jan 10, 2017 11:47am

Very true,"The long list of such revenue measures disguised as amnesty schemes and documentation exercises now give the government the appearance of pleading for cooperation with racketeers and tax evaders"

Amir Ali Khan Jan 10, 2017 12:15pm

The scheme is being considered , perhaps , to mollify general excitement created by the ongoing Panama case proceedings .