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Tax amnesty again

May 16, 2019

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IF the past is any guide, tax amnesty schemes in Pakistan have been little more than revenue-generating exercises.

There is ample precedent to confirm this, given the large number of schemes that have come and gone in the past decade.

The leadership of the PTI rightly opposed all previous tax amnesties — not on narrow technical grounds, but on a point of principle.

It argued that such exercises were tantamount to the state kneeling before powerful criminal elements, besides making those complying with the tax laws feel like fools.

Today, the party may have its own reasons for bringing forward another amnesty scheme, but until the finance team shares further details, such as the impact it expects the scheme to have, it will have to be assumed that this is again more of a revenue-generating exercise than an actual attempt to document the economy.

The scheme raises questions for many reasons.

Barring minor tweaks here and there, the overall scheme is almost identical to the one announced by the then PML-N- government last year, which came under severe fire from the PTI.

One thing different this time is the subdued tone of the announcement.

Where the then finance adviser Miftah Ismail had used soaring rhetoric to describe his amnesty scheme, its objectives, and likely impact, Hafeez Shaikh, the current adviser, has only said that the intention of the scheme was to promote the documentation of the economy.

That is fine as an objective, if only there was evidence that such schemes do promote documentation.

The last time this scheme was used a year ago, it was similarly tagged as a documentation exercise. In hindsight, it is clear that it was no such thing, or else a second round would not be necessary today at such a short interval after the last one.

In fact, this is the fifth such scheme in the past five years, and the evidence from each exercise has been that it yields no meaningful results on the documentation side.

Only in some cases do these schemes yield a small amount as revenue for the state.

The last scheme was seen as successful because thousands of people and entities participated, and the revenue raised was around Rs80bn, which was enough to help the interim government tide over some of its expenses.

This time, there are reports that the government hopes to raise up to Rs300bn through the scheme, though there is no official confirmation of revenue expectations.

To boost participation, the scheme has opened the door to benami assets as well, which is dangerous because that is where the proceeds of crime are often hidden.

Even if the government means well, the amnesty scheme is a disappointment, and, learning from the past, it would be better if this is the last such endeavour.

Published in Dawn, May 16th, 2019