At a federal cabinet meeting, the government has decided to extend the tax amnesty scheme for one month with a cut-off date of July 31. The decision has been finalised by care-taker Finance Minister Dr. Shamshad Akhtar, who had previously been representing Pakistan at FATF meeting in Paris.

The extension in deadline is not surprising considering the unexpected surplus of funds that had been brought in through the amnesty scheme the last few weeks, possibly due to a Supreme Court hearing approving the scheme.  When the tax amnesty scheme was introduced by the then PM Shahid Khaqan Abbasi, it was criticised for its timing and for the general futility of amnesty schemes, which have in the past been unsuccessful. However, this time it appears that this scheme, after an initial lacklustre start, has managed to break the losing streak and invoked interest, as  approximately Rs100 billion has been deposited  in taxes until now under the scheme.

Pakistan’s economy right now is in a bad shape, with the rupee devaluation, a debilitating deficit and increasing hikes in petroleum prices. While the tax amnesty scheme did look bad on paper initially, any surplus of funds to decrease the deficit would be a relief. While we don’t endorse activism by care-taker governments, this extension was the right move to mitigate the worrying downturn the economy has taken. 

However, it should be kept in mind that amnesty schemes work only if the government and state institutions persist and invest in them. The scheme was disappointing until a SC decision, which increased interest and trust in the scheme. The government should thus not be complacent with its early win and work further to ensure smooth proceeding of these schemes to extract the remaining assets that are yet undeclared into the tax stream.