ISLAMABD: The presidential ordinance to introduce tax amnesty scheme announced by Prime Minister Shahid Khaqan Abbasi earlier this week is expected to be promulgated today.
PM Abbasi on Thursday unveiled an economic reforms package, including five-point tax amnesty scheme for foreign and domestic assets, reduction in income tax rates and launch of dollar bond.
A Senate session is starting Monday, so it will be difficult for the PML-N government to introduce the scheme if the ordinance is not promulgated today.
Announcing the scheme, Abbasi said there had been disturbances due to sit-ins, NewsLeaks and Panama verdict, certainly leaving a negative impact on the country’s economy. The Foreign Asset Declaration and Repatriation Ordinance will not be available to Politically Exposed Persons (PEPs), including politicians and their spouses and dependents, public office holders/people in services of Pakistan.
Individual tax rates were reduced massively as there would be zero tax on annual income up to Rs1.2 million. Any individuals having monthly income of Rs100,000 will pay no tax. Tax rate will be 5 percent for annual income bracket from Rs1.2 million to Rs2.4 million, 10 percent for annual income bracket from Rs2.4 million to Rs4.8 million, 15 percent for annual income bracket from Rs4.8 million and above.
The government move is modeled after India whereby the government will buy land at double rate for ensuring registration of land at actual market price but simultaneously the registration rate was reduced to one percent by doing away with the FBR and DC notified rates.
Abbasi said there were challenges on the front of current account deficit, which would be resolved. Regarding Foreign Assets Declaration and Repatriation Ordinance, the PM said that the scope of the ordinance extends to every resident company, resident association of persons and all citizens of Pakistan wherever they may be except holders of public office. It provides for foreign exchange repatriation on two percent payment, with two options – Bonds for five years at the rate of three percent per annum (6 month payment and not encashable in year 1) and all encashment in Pak rupee at prevailing interbank dollar rate.
The other salient features of the ordinance include that new accounts of forex from local markets can be opened by tax filers only and all dollar remittances less than 100,000/year/person will continue without any questions about the source and enjoy tax exemptions.
According to the ordinance, all dollar remittances greater than 100,000/year/person will enjoy tax exemptions but only the FBR will question the source. This information will not be shared with any other agency. Moreover, the scope of Voluntary declaration of Domestic Assets Ordinance extends to every resident company, resident association of persons and all citizens of Pakistan wherever they may be except holders of public office. The ordinance provides for regularisation of all undeclared incomes earned before June 30, 2017 on all local assets (gold, bonds, property) on a payment of five percent.
The FBR rate on property would be abolished and provinces will be requested to abolish DC rate. Other salient features include that no purchase is possible for non-filers of tax returns of property over Rs4 million and CNIC will be merged as National Tax Number (NTN).
There will be reduced tax incidence as maximum one percent tax (local & provincial) for registration of property is recommended. At federal level, Advance Income Tax is being reduced to one percent, which is adjustable and federal government will have the power to buy individual properties anywhere in Pakistan within six months of registration for 100 percent more for properties registered in FY2018-19, 75 percent more for properties registered in FY 2019-20 and 50 percent more for properties registered in FY 2020-21 and thereafter.
Pakistan has signed and ratified the OECD’s Multilateral Convention on Mutual Administrative Assistance in Tax Matters. Under this Convention, an exchange of information mechanism is being established for tax purposes with more than 100 countries, including most of the tax havens.
It will enable Pakistan to seek information on banking and other details of Pakistani residents from these countries for taxable periods from 2018 onwards and for tax matters involving intentional conduct which is liable to prosecution, for earlier taxable periods as well.
Pakistan is also commencing automatic exchange of financial accounts information under the OECD umbrella from September 2018 onwards and will now receive detailed information about banking and other financial accounts of Pakistanis automatically each year from other countries and jurisdictions.
The provisions of this Convention will expose Pakistanis’ hidden offshore accounts and assets to FBR and help contain cross-border tax evasion. The Foreign Assets Declaration and Repatriation Ordinance is not valid for categories such as money laundering, drug smuggling and terror financing. It is not applicable to current public office holders/people in service of Pakistan including their spouses and dependent children.