ISLAMABAD: As a signatory to a multilateral convention of the Organisation for Economic Cooperation and Development (OECD), Pakistan will be eligible to officially access information about offshore financial accounts of Pakistani residents with effect from Sept 1.
Official records seen by Dawn suggest that the Federal Board of Revenue (FBR) is ready to make the process of accessing information about offshore financial accounts of Pakistani residents held in the signatory countries operational from September onwards.
Necessary amendments have already been made to the Protection of Economic Reform Act, 1992, to regulate foreign exchange movement and bring it in line with Income Tax Ordinance, 2001.
Tax authorities may inquire about source of foreign remittance on sums exceeding Rs10m
Amendments have also been made to the Income Tax Ordinance, 2001, whereby the FBR may inquire about the source of foreign remittance on sums exceeding Rs10 million. Furthermore, the previous limitation of five years to probe foreign assets and income has also been discarded.
Official sources said the overall public response to the recent amnesty schemes has been very positive. “This response to the amnesty scheme has been unprecedented in the history of Pakistan and also makes it one of the most successful schemes worldwide,” claimed an official source.
A total of 82,443 declarations were filed with declared value of foreign assets of around Rs1.009 trillion and domestic assets of around Rs1.474tr. The total value of declared assets at home and abroad stood at Rs2.48tr.
The declarants paid taxes of around Rs123 billion out of which Rs46bn ($375.5m) have been collected on foreign assets and Rs77bn on domestic assets. In addition, $32m has been repatriated and converted into rupees and $24m in dollar denominated bonds, whereas $8m in taxes, which came from declaration of foreign assets, is currently being processed.
The amnesty scheme for foreign assets was applicable to both liquid and immovable assets such as bank accounts, shares and mortgaged properties. Tax rates ranged from two per cent to 5pc, depending on the type of asset. Special tax rate of 2pc was applicable to liquid assets which were repatriated to Pakistan. The amnesty scheme for domestic assets covered all types of assets and income, with tax rates of 2pc and 5pc.
To protect the declarants from any harassment, both schemes under Voluntary Declaration of Domestic Assets Act, 2018 and Foreign Assets (Declaration and Repatriation) Act, 2018 ensured complete confidentiality of a declarant’s information. Moreover, such information is not admissible as evidence against the declarant under any other law.
Under the mechanism for payment of tax on foreign assets, tax in US dollar was required to be deposited in State Bank of Pakistan’s account through wire transfer. Government of Pakistan’s US Dollar Denominated Amnesty Rules, 2018 were also issued to authorise the SBP to retail these bonds at an attractive annual profit of 3pc to be paid semi-annually. The maturity of bonds is five years.
According to the prescribed rules, citizens of Pakistan were allowed to invest in these bonds out of remittances declared under the foreign amnesty or through encashment of foreign currency accounts held in Pakistan.
The government believes that the low rates of amnesty schemes ranging between 2pc and 5pc and assurance of protecting declarants’ identities served as a major incentive for individuals declaring their assets and income. Revenues from the amnesty schemes would help in documentation of the economy as well as bring in one-time windfall from non-declarants to officialise their assets, the officials argued.
Published in Dawn, August 22nd, 2018