LAHORE - The business community on Thursday welcomed the prime minister's announcement of one-time tax amnesty scheme to bring back the offshore wealth and regularize foreign assets of Pakistanis living abroad with tax rate of just 2 percent, paving way for the country to receive around $3-4 billion.
Punjab Industrial Estates Development and Management Company (PIEDMC) Chairman Abdul Basit said although, all major amnesty schemes in the past had failed to get the desired results and most of the international financial institutions including the IMF and World Bank also opposed amnesty scheme because it discourages honest taxpayers, yet he argued that this scheme would become successful this time keeping in view the global environment against tax evaders and money launderers.
"This is first scheme to whiten the foreign assets in the history of Pakistan, not aimed at whiten the black money rather to bring the money for capitalization and investment in Pakistan," he added.
Abdul Basit, also the former president of LCCI and ex-chairman of the PBIT, said that the success of the scheme depends on attitude of the authorities who are at the helm of the affairs and who are implementing this important scheme. "If they change their attitude there are chances that Pakistan get attraction of its own industrialists who had took out money majorly due to harassment of bureaucracy from Pakistan to Dubai real estate sector and they might regularize their billions of rupees assets.
FPCCI Standing Committee on Tax Reforms Chairman Kashif Anwar also hailed the government decision of one-time tax amnesty scheme to bring back the offshore wealth of Pakistanis deposited with foreign banks.
"Amnesties are good to attract the non-tax payers but these schemes should have been drafted keeping in view of long-term effects for new entrants so that tax base is increased. The schemes should be foolproof and so powerful that no authority could hijack them," he added.
He said several countries have introduced One-time Amnesty Scheme for acceleration in the economic growth through utilization of hidden liquid assets in the main stream of the economy.
He said the inflow of FDI is directly associated with the trend of investment by local investors, stating the scheme announced by the PM would also give confidence to the foreign investors as well as the local business community.
He said that many of the locals have invested in Middle East and Western Europe and off shore companies.
Kashif Anwar said objective should not be to provide a shelter to illegal practices but to bring the isolated liquid assets into main stream of economy.
Rice Exporters Association of Pakistan chairman and former president of GCCI Samee Ullah Ch said that amnesty schemes do not only discourage documented taxpayers by legalizing illegal assets at lower rates of taxes, but they also undermine the state's capacity to tax in the future.
Pakistan's tax-to-GDP ratio of about 12% is the lowest regionally and among the lowest globally.
Regularizing black assets through amnesty schemes has failed to speed up tax recovery in the past.
Samee said that our tax compliance ratio has declined substantially over the last decade, as there are around 3.4 million registered taxpayers, but only 20% actually pay taxes. In order to reform the tax system we need to implement equitable broad-base taxes, he suggested.
He said that in the history of Pakistan tax amnesty on black money has never produced the desired results in terms of expanding the tax base to generate substantial amount of revenue.
Noted economist Dr Salman Shah said that policymakers need to ensure that such schemes are not politically motivated, but part of a wider tax reforms.
He said that the move could help utilization to provide funds for the growth of national economy, development of basic business infrastructure and to provide employment opportunities at large scale.