Tax Amnesty Scheme in

Pakistan (2019)

Name_______ Muhammad Hamza Zahid

Roll No#______ 180070
Subject#_______ TAXATION
Instructor#______ Sir Tauseef Shaukat
__ASSIGNMENT#04__
Submission Date: 14 May,2020

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 Tax Amnesty Scheme in Pakistan
 Introduction to Tax Amnesty Scheme
Tax amnesty is type of scheme in taxation in which limited time opportunity given for a
specified group of taxpayer to pay a defined amount, in exchange for forgiveness of a tax
liability which includes interest and tax penalties relating to the previous tax period. It
typically expires when some authority begin tax investigation of the past due tax, in some
scenarios legislation extended the time for the citizens and also impose heavy penalties on
those who are eligible for amnesty but do not take it. Tax amnesty is considered one of the
strategy to increase the tax base and tax revenues. This amnesty scheme is usually different
from other voluntary schemes and it will be introduced by state in any fiscal year to help the
country to increase its revenues. The main purpose of this scheme is to encourage the
individuals and corporations to declare their wealth as it arises. When such tax amnesties are
introduced by the government of the country then the government and tax department of the
country give time limit to individuals and corporations to declare their wealth without any
penalty but when the time elapse there will be penalty addition to original amnesty tax rate.

 Types Of Tax Amnesties

Tax amnesty scheme have 2main types which are following
1. Legal Amnesty
2. Financial Amnesty
These legal and financial amnesty schemes are classified on the same criterion this the reason
why all over the world tax amnesty scheme divided into two types. There are schemes in the
country where government provide financial relief to tax evader under such schemes
government decide to reject all penalties which become due as a result of tax evasion. But in
some cases government just allow taxpayer to payback the total sum of tax in easy
installments over a long time frame. In some cases like capital gains legal immunity is not
provided because investor can earn on unpaid tax as well. This would clarify that the taxable
income generated through illegal activities such as Drug smuggling then the government can
sue the taxpayer.
On the other side, there are some amnesty schemes which provides legal amnesty as well,
which means these schemes basically promise that the government will simply close their
eyes to the source of taxable income as well. The government make an agreement with
taxpayer to not disclose any information after they receive the tax revenue which is due to
them.

 History Of Tax Amnesty In Pakistan

Pakistan is a developing country there are almost few people pay their taxes to increase
the tax revenue government of Pakistan introduced amnesty schemes many times to boost
the economy and revenue of country. In Pakistan there are almost 12amnesty schemes
were introduced since from last 60years for the citizen of Pakistan to represent their
illegal property and to make their black money legally verified or turn into white assets

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 Tax Amnesty Scheme in Pakistan
by government and to contribute them in net-tax. After every 10years there were amnesty
scheme introduced by government in Pakistan.
 General Ayub khan brought first amnesty scheme in 1958, which brought
approximately 71000 declaration, 266,183 taxpayers which contributed almost
Rs-/1.12billion to revenue box. But tax collection remain less than 10% of the
total GDP 1958-59.
 Over 142million was collected through the 1997 tax amnesty scheme.
 In the year 2000, the amnesty scheme were launched under the regime of General
Musharraf. During this scheme some present officials in 2000 had declared their
asset. Approximately 79,200 declarations were filled bringing in Rs-/10 billion to
the government’s revenue.
 In the year 2001, a tax amnesty scheme called “Investment Tax on income”
inserted vide section 120A of the income tax ordinance, had given a similar
facility to whiten/legal untaxed money & assets by paying just 2%. The effort
proved fruitless as only Rs-/ 2.5 billion was received.
 During 2008, in the government of Pakistan peoples-party had pledged the sincere
commitment before the parliament that after “Tax investment scheme of 2008”, it
would not introduce any more investment schemes, which was just a drama for
critics. However, PPP regime had gone to offer same to the stock exchange
investors in April 2012 and all kinds of concession were dished out to tax evaders
during the month of May and June 2012 to achieve the time’s budget target Rs-/
1,952 billion. The target was missed by across over Rs-/70billion.
 In 2013, during the government of PML (N) had announced a money whitening
scheme which were dealing only with those assets which held just inside the
country. This scheme was primarily intended for owners of the Non-custom cars
which bring them non-custom cars in Pakistan without paying taxes.
 In 2016, National Assembly panel approved a blanket tax amnesty scheme to
written an estimated Rs-/7 trillion of black money invested in real estate sector
despite rigid opposition by FBR. But the scheme saw just 10,000 declaration
coming forth, contributing only Rs-/0.85million on December 01, 2016. This
scheme was seen as a defeat of Finance ministry because they had undertaken to
forced people to pay their taxes on property transaction at fair market value just
5month back then National Assembly approved the amnesty scheme of real estate
sector in 2016.
 In April 2018 by June 30, nearly 5000 people in Pakistan had filled return
declaring their foreign assets which were deposited approximately Rs-/80 billion
in taxes. This scheme were introduced in the government of PML (N) when the
Shahid Khaqan Abbasi was president, this scheme was passed through the
parliament to boost the national foreign exchange reserves which were the float
around USD ($)10 Billion mark, sufficient to finance hardly 2months of import.

 Amnesty Scheme Introduced By Current Government (PTI)

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 Tax Amnesty Scheme in Pakistan
Current government of Pakistan is Pakistan Tehreek-E-Insaf (PTI) who introduced the
amnesty scheme in 2019 this is the first scheme which is unveils from the PTI. The present
government PTI announced the about first amnesty scheme for whitening of undisclosed
expenditure/sale an asset/ including foreign assets at formal tax rate on May 16,2019, this
amnesty scheme is approved by federal cabinet by the meeting with Prime Minster Imran
Khan specifying the five pillars of the scheme which are following
1. Scope
2. Default Surcharge
3. Exclusion
4. Tax rate
5. Condition
The last date of filing the return under asset declaration ordinance 2019 was June 30, 2019,
which was extended to July 3, 2019. It is the first time that government has allowed the
taxpayers or declarant to pay taxes under the amnesty scheme till June 30, 2020 subject to the
return file up due date. The period of this scheme filing return is 45dys. This amnesty scheme
can be availed by all companies/ association of persons and individuals to whiten their asset,
expenditures and sales. There is no amenities/provision for whitening both foreign and
domestic undeclared income. There are some conditions attached to availing this scheme. It is
mandatory for the person availing the scheme to file income tax returns for the tax year 2018
and the financial statements and the wealth statements.
Under this scheme asset within or foreign country can be whitened at the rate of 4%,
excluding the real estate. The whitened the cash asset will be kept into bank account and the
amount will be retained in the bank account till 30 June, 2019, but for the people who wanted
to put their whitened money abroad a rate of 6% will be charged to them. The taxpayers or
declarant were allowed late payment with 10% default penalty on total tax due by September
30, 2019. Individuals were allowed to take the advantage of this amnesty scheme to pay the
20% of the tax due to validate their returns by December 31, 2019. Tax can be paid till 30
June, 2020 but with the penalty of 40% on the actual declared amount.
The FBR provisionally collected Rs-/1.608trillion during the first 5months 2019-20 as agreed
under the IMF loan program. IMF revised the collection target downward from
RS-/5.5trillion to Rs-/5.23trillion for the current fiscal year 2019-20. The present government
will not issue any further tax amnesty scheme till the finalization of IMF loan. As per the
amnesty scheme government allows to document the concealed assets other than immovable
properties at 4%.
For the declaration of the real estate, its value will be considered 1.5times on FBR value to
bring it on market value. The value of real estate is considered 1.5times of the duty charges
or DC value where the FBR value has not been notified or less than the DC rate. Under the
amnesty scheme 2019 a person was allowed to enhance the declared value of immoveable
property. The tax rate will be 1.5Pc for whitening of domestic immovable properties in real
estate. In case of foreign assets the fair market value will be determine at the exchange rate
recognized on the date of declaration.

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 Tax Amnesty Scheme in Pakistan
The tax rate on undisclosed sales/supplies is 2PC which is also offered for the first time for
bringing undeclared sales into the tax net. This will over the sale chargeable to the excise
duty which has not been declared or has been under declared up to June 30, 2018.
This scheme was not availed by the holders of public offices & officials including President,
Prime Minister, Chief Ministers, Governors, Chief Justice of Pakistan, judges their spouses
and dependent children and any public listed company.
The purpose of this scheme by Pakistan Tehreek-e-Insaf is to document the economy. This
scheme was introduced specially for those people in Pakistan who were non-filers. The
person making a declaration under section 5, this tax amnesty scheme of Pakistan in 2019 is
about the undisclosed sales & income and undeclared asset. The declaration can be made
electronically on the web portal as specified by the federal government under-subs section 1.
There is also some other points as Incorporation in books of account where a declarant has
made declaration under section 5, he/she shall be entitled to incorporate such assets, income
or sales in his books of account. Any person shall be entitled to incorporate asset in the record
acquired which have been bared by the time of limitation under the income tax ordinance
2001.
There are some restrictions which was related to transfer of asset, deposit and conversion of
bearer asset declared under the ordinance shall be prohibited to be transferred to any
holder/citizen of public office as a gift. Where an asset under the ordinance is transferred in
violation of the mentioned condition such declaration shall be void. Another restriction is
cash in hand declaration, because where any cash in hand has been declared, the same
declared cash will be deposited before the filing of declaration. Another restriction in 2019
tax amnesty scheme is the bearer asset declaration because it is not allowed to declare the
bearer asset including the bearer prize bonds.
As Imran khan introduced Tax amnesty scheme in 2019 Nawaz Sharif’s government also
introduced tax amnesty scheme in 2018 but failed to generate much revenue to boost
economy. In PTI’s era 2019 people whitened their undeclared asset of almost Rs-/3trillion
and bring 137000 tax payers but in Nawaz government net worth of Rs-/2.5trillion were
whitened and brought 83000 new taxpayers. PTI’s government help to legalize their asset,
income and sales to whitened their money. Imran khan in an interview said that all official
will stay away from the amnesty schemes because first officials steal money then introduced
tax amnesty scheme to turn steal money into legal income such beneficiaries who availing
this scheme will be put behind the bars. In the 2019 tax amnesty scheme ordinance defined
that any official and public office holder will not be eligible for this scheme.
This 2019 amnesty scheme help to increase tax revenue in the Pakistan’s economy and also
helpful for those people who turned the illegal assets into legal assets. In Pakistan’s history
amnesty scheme remain for the short term period and only few people were got advantage
from this scheme. Prime Minister Imran Khan believes that by introducing such schemes it
will encourage citizen to pay their taxes and show their responsibility he also believes that
number of taxpayers will increase till 2021 if government announce such schemes to give
advantage to the individuals and help to encourage taxpayers.

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