Prime Minister Shahid Khaqan Abbasi Thursday announced an income-tax reforms package coupled with a tax-amnesty scheme to bring the non-taxpayers and tax evaders into the tax-net and broaden the revenue base of the country where only 1.2 million people out of the total population of 207 million pay taxes. Under the new one-time tax-amnesty scheme which would be available till June 30, 2018, local and foreign assets in the shape of cash could be whitened by paying 5% and 2% penalty, respectively, on the undeclared assets, Prime Minister Abbasi said while addressing a crowded press conference here at the PM Secretariat.
Besides, he said, the amnesty scheme also provided a facility of one-time payment of 3% penalty for whitening of non-cash assets.
The prime minister further announced that those having undeclared dollar accounts in foreign countries could also declare the same and whiten the money by paying 5% of the undeclared dollar amounts.
He, however, clarified that the “politically exposed” people and their families would not be eligible to benefit from the new tax-amnesty scheme, which unlike the past was not meant to generate revenue but to bring the non-taxpayers and tax evaders into the tax-net and broaden the tax base.
Prime Minister Abbasi while giving details of the proposed reforms package, said it was aimed at generating additional revenue and the Computerized National Identity Cards (CNIC) of 120 million citizens would be considered as their national tax numbers.
He said under the reforms package, the existing income tax rates which were up to 30% – and one of the main reasons for tax evasion – would be reduced substantially and made sustainable.
The prime minister said income tax rates for individuals were being proposed to be rationalized as a person having an annual income of upto Rs 1.2 million would be exempt from income tax. While 5% income tax would be charged on those with income ranging from Rs 1.2 million to Rs 2.4 million per annum; 10% on Rs 4.8 million income per annum, and 15% on over Rs 4.8 million income per annum.
He said as people hid their assets by injecting black money in property and then declaring the same much less than the original value, the government had proposed to impose 1% tax on property, which could be adjusted in the overall annual income tax. The federal government would also ask the provinces to lower the rates to one per cent to discourage under value declaration, he added.
The prime minister said in order to check the under-statement of property value, the government would have the right to purchase a property on double the value declared by the owner during the year 2018-19, at 75 per cent more in 2019-20 and at 50 per cent more in 2020-21. He said it would not be possible for non-filers to purchase any property for over Rs 4 million.
The proposed scheme would make the DC (District Collector) rates of the property irrelevant and the people would have to declare the real value of their property, he added.
He said the scope of the ordinance to be issued in that regard would extend to every resident company, resident association of persons and all citizens of Pakistan wherever they might be except holders of public office. It would help regularize all undeclared income earned before June 30, 2017 on all local assets, including gold, bonds and property on payment of 5 % tax.
The prime minister said technology would be used for tax payer identification and a comprehensive data-base would be established to monitor the financial transactions of every citizen having a CNIC, including payment of utility bills, school fees, foreign travels etc.
He said the proposed scheme would also help check corruption, as Federal Board of Revenue (FBR) officials would not be issuing notices on their own and the notices would be served only on the basis of data gathered through monitoring of financial transactions of citizens during July 1 to June 30 of every fiscal year.
Prime Minister Abbasi said those benefitting from the one-time tax-amnesty scheme would be protected in the ordinance, and those, who would not avail the opportunity, would be identified and penalized.
He said every citizen was duty-bound to pay due taxes so that the state was run, as when the people did not pay due taxes, the government had to go for indirect taxation, which burdened the common man.
The prime minister pointed out that half a million people from a total of 1.2 million taxpayers in Pakistan paid zero tax and 90% of the remaining 0.7 million taxpayers were those who had no choice as they were salaried persons.
He said the amnesty scheme was also not applicable to current public office-holders / people in service of Pakistan, including their spouses and dependent children.
He ruled out the impression that the amnesty scheme was aimed at facilitating any particular individual and clarified that those having assets under offshore companies would also be allowed to repatriate their assets by paying the announced penalties.
He said the amnesty scheme was solely meant for increasing the tax net and bring in revenue for the government as increase in direct taxation would ultimately decrease the indirect taxes.
To a question, the prime minister said there should be around 30 million tax payers and the government could achieve the mark if efforts were made. He said the taxation was part of all political parties’ manifestos and no party could oppose decreasing the tax rate.
To a question, the prime minister said tax evaders would be dealt with strictly by detecting them through the use of technology and the government would question them to justify their assets beyond their income declared in tax returns. However, the sentence for the evaders would be decided by the parliament, he added.
He said through legislation, the government would also plug all loopholes in the existing laws, which were being misused for tax evasion. To another question, the prime minister said those, who had been relieved of taxes in the package, would also have to file their returns showing zero tax. He said the simplified policy would impact the upcoming budget that had been formulated after marathon discussions.