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PM hints at documenting black economy

June 24, 2008

ISLAMABAD, June 23: Prime Minister Yousuf Raza Gilani will launch a massive scheme to document black economy by appealing to the nation for voluntarily declaring untaxed assets.

The move, likely to come at the concluding budget session of the National Assembly, is aimed at documenting the black economy and will be part of an investment tax scheme that allows taxpayers to disclose their undeclared businesses, capital and assets by paying just two per cent of their market value.

A well-placed source told Dawn on Monday that the prime minister would urge parliamentarians to persuade voters to make the scheme a success for widening the narrow tax base.

Under the scheme, people who declare their assets would not have any fear of investigation into their tax affairs for the past provided they declare their assets at a nominal tax rate of two per cent and file their income tax returns for that year and three consecutive years.

Only 2.2 million taxpayers in a population of 160 million represents the lowest ratio in the region and tax-to-GDP ratio has remained static at about 11 per cent for the past many years, added the source.

A tax arrears settlement incentive scheme (TASIS) has also been introduced for tax defaulters to broaden the tax net. Tax defaulters will be allowed to pay the principal amount of due tax.

The additional tax, which can be 100pc of the principal amount, would not be charged and penalties levied for non-payment would be withdrawn. An amnesty scheme has been introduced where unregistered manufacturers and retailers have been offered amnesty from paying past liabilities if they voluntarily register between June 11 to July 31.

According to amendments made in the finance bill by National Assembly, sales tax exemption has been granted to hospitals owned by federal or provincial governments, hospitals of statutory teaching universities having 200 or more beds and charitable hospitals having 50 or more beds.

The services of property developers and promoters have been subjected to federal excise duty. The development of plots shall be subject to excise duty at Rs100 per square yard and construction of residential and commercial units shall be subject to excise duty at the rate of Rs50 per square foot of the covered area.

Amendments pertaining to customs include the reduction of import duty on sulphonic acid from 15pc to 10pc. Earlier, fixed tax was imposed on builders and developers. Now this tax has been withdrawn as income tax and the federal excise duty on services of property developers and builders has been levied.

Under income tax, through an amendment the urban area for the purpose of capital value tax has been restricted to rating areas only and the prescribed limits for its calculation have been withdrawn.